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NO.  95-82387- 1 3 


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Author: 


Johnson,  Emory  Richard 


Title: 


Ocean  rates  and  terminal 
charges 

Place: 

Washington,  D.C. 

Date: 

1919 


MASTER    NEGATIVE   # 


COLUMBIA  UNIVERSITY  LIBRARIES 
PRESERVATION  DIVISION 

BIBLIOGRAPHIC  MICROFORM  TARGET 


ORIGINAL  MATERIAL  AS  FILMED  -     EXISTING  BIBLIOGRAPHIC  RECORD 


566 
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Johnson,  Emory  Richard,  1864-1950. 

Ocoan  rat(3S  and  tcrniiiial  charges.  Report  by  Emory 
It.  Joliiison.    AVashingtoii,  Govt,  print,  off.,  1919. 

84  p.  inch  tables.    24^"*. 

"At  the  end  of  May,  1918,  the  United  States  Shipping  board  requested 
the  director  of  the  Division  of  j)lanning  and  statistics  to  have  an  investi- 
gation made  of  the  subject  of  ocean  rates.  This  is  a  report  of  that 
investigation," — p.  5. 


1.  Sliipping — Rates.         i.  U.  S.    Shipping  board,    ii.  Title. 


Library  of  Congress 
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TERMINAL  CHARGES 


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SCHOOL  OF  BUSiNJ 

REPORT 


BY 


Emory  R.  Johnson 


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56  5 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 

1019 


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LIBRARY 


School  of  Business 


OCEAN  RATES  . 


AND 


TERMINAL  CHARGES 


REPORT 


BY 


Emory  R.  Johnson 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 

1919 


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^2-3 


CONTENTS. 


Page. 

Chapter  I.  Purpose  and  scope  of  the  report 5 

II.  Requisition  rates g 

III.  Ocean  charter  and  freight  rates xi 

IV.  Terminal  services  and  charges 23 

V.  Costs  and  rates 27 

VI.  Rate  making  and  rate  control  by  the  Shipping  Board 32 

VII.  Rate  regulation  by  the  Shipping  Board 35 

VIII.  Organization  for  regulation  of  ocean  rates  and  terminal  charges 40 

IX.  Summary  and  recommendations 45 


J) 


Appendix  I.  Memorandum  on  requisition  rates,  recommending  a  new  scale. 

II.  Memorandum  on  return  on  investment  (interest,  depreciation,  amortiza- 
tion) to  be  earned  on  Shipping  Board  ships. 

III.  Sample  cards  from  the  file  of  charter  rates.    Sample  sheets  from  the 

summaries  of  trip  charter  and  time  charter  rates. 

IV.  Report  dn  investigation  of  freight  rates  at  Atlantic  and  Gulf  ports. 
V.  Report  on  investigation  of  freight  rates  at  Pacific  ports. 

VI.  Notes  upon  making  ocean  rates  basod  on  costs. 

a 


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CHAPTER  I. 
PURPOSE  AND  SCOPE  OF  THE  REPORT. 

At  the  end  of  May,  1918,  the  United  States  Shipping  Board  re- 
quested the  Director  of  the  Division  of  Planning  and  Statistics  to 
have  an  investigation  made  of  the  subject  of  ocean  rates.  This  is 
a  report  of  that  investigation. 

The  compilation  of  freight  rates  was  at  once  undertaken  in  order 
both  to  learn  what  rates  on  the  exports  and  imports  of  the  United 
States  had  been,  and  had  not  been,  fixed  by  the  Shipping  Board  or 
by  the  Governments  of  Great  Britain  and  France  with  the  formal  or 
tacit  approval  of  the  United  States,  and  also  to  discover  what  ocean 
rates,  in  the  absence  of  Government  control,  were  being  charged  by 
the  carriers  engaged  in  the  trade  of  the  United  States  with  different 
parts  of  the  world.  It  was  also  thought  that  actual  rates  should  be 
ascertained  as  a  preliminary  to  such  subsequent  control  or  regulation 
of  rates  as  the  Shipping  Board  might  decide  to  exercise.  The  freight 
rates  which  ocean  carriers  were  asked  to  report  were  those  that  had 
been  charged  during  the  year  ending  June  30,  1918,  the  year  preced- 
ing the  date  of  the  inquiry. 

The  investigation  as  first  planned  was  to  include  an  analysis  of 
the  costs  of  the  freight  services  performed  by  vessels  owned  and 
operated  by  the  Shipping  Board  and  by  vessels  requisitioned  by  the 
board  and  operated  by  its  agents.  The  costs  were  to  include  those 
incident  to  investment  and  to  operation  and  were  to  be  analyzed  for 
voyages  and  for  periods  of  time. 

When  the  investigation  was  started,  it  was  supposed  that  the 
desired  cost  data  could  readily  be  secured  from  the  accounts  of  the 
comptroller  of  the  Shipping  Board;  but  during  the  latter  half  of  1918 
the  comptroller  was  reorganizing  the  accounts  of  the  board,  and  it 
was  not  imtil  January,  1919,  that  his  records  and  tabulating  facilities 
were  such  as  to  make  possible  the  analyses  from  which  the  costs  of 
freight  services  could  be  calculated.  These  cost  analyses  thus  be- 
came possible  two  months  after  the  signing  of  the  armistice,  and  at  a 
time  when  data  as  to  the  cost  of  operating  vessels  during  the  period 
of  the  war  were  no  longer  of  much  significance.  Analyses  of  the 
costs  of  service  wiU,  however,  be  of  assistance  in  the  future  in  the 
making  and  regulation  of  ocean  rates. 

This  report  discusses  the  place  which  shall  be  given  cost  in  the  deter- 
mination of  rates  but,  for  obvious  reasons,  does  not  attempt  to  show 
what  rates  for  the  main  ocean  trades  would  have  corresponded  to 

the  costs  of  service  at  the  close  of  1918. 

5 


& 


6  OCEAN  RATES  AND  TERMINAL  CHARGES. 

After  the  investigation  was  started,  two  additions  were  made  to 
the  work.  In  July,  the  Law  Division  was  requested  by  the  Shipping 
Board  to  inquire  into  and  to  report  upon  the  schedule  of  rates 
paid  for  requisitioned  vessels.  The  Law  Division  asked  the  Rate 
Investigation  to  secure  information  regarding  the  cost  to  the  owners 
of  vessels  requisitioned  and  the  expenses  incurred  by  companies  that 
operated  such  vessels  for  the  Shipping  Board  under  time  form  charter. 
The  information  having  been  obtained,  a  ^'Memorandum  on  requisi- 
tion rates  recommending  a  new  schedule"  was  prepared.  In  accord- 
ance with  the  wishes  of  the  Law  Division,  this  memorandum  was,  on 
the  8th  of  November,  1918,  submitted  to  the  Director  of  the  Division 
of  Planning  and  Statistics,  who  transmitted  the  memorandum  to  the 
board  with  his  approval.  The  memorandum  forms  Appendix  I  of 
this  report. 

The  other  addition  to  the  investigation  was  occasioned  by  the 
enactment  of  the  law  of  July  16,  1918,  section  12  of  which  empow- 
ered the  President  to  prescribe  the  order  of  priority  of  the  use  of 
the  various  port  and  terminal  facilities  and  services,  and  to  "deter- 
mine, prescribe,  and  enforce  the  rates,  terms,  and  conditions  charged 
or  required  for  the  fuirnishing  of  such  services."  By  Executive  order, 
issued  December  3,  1918,  the  President  authorized  the  Shipping  Board 
to  exercise  the  power  conferred  on  him  by  section  12  of  this  act, 
stipulating,  however,  that  the  power  thus  delegated  should  ''not 
extend  to  any  dry  docks,  wharves,  lighterage  systems,  or  loading  or 
discharging  terminal  facihties  or  warehouses,  equipment,  or  terminal 
railways  which  are  now  or  may  hereafter  be  placed  under  the  juris- 
diction or  control  of  the  Secretary  of  War,  or  Secretary  of  the  Navy, 
or  the  Director  General  of  Railroads." 

It  was  decided  that  an  investigation  should  be  made  of  ocean 
terminal  services  and  charges  to  secure  information  needed  for  the 
enforcement,  not  only  of  the  section  of  the  law  just  quoted  but 
also  of  the  shipping  act  of  September,  1916,  which  gives  the  Ship- 
ping Board  authority  over  the  regulations  and  practices  of  individ- 
uals or  companies  "carrying  on  the  business  of  forwarding  of  fur- 
nishing wharfage,  dock,  warehouse,  or  other  terminal  facilities  in 
connection  with  a  common  carrier  by  water."  The  addition  to  this 
study  appreciably  increased  the  work  to  be  done.  The  investigation 
of  terminal  charges  has  been  made  by  Dr.  C.  O.  Ruggles,  who  has 
prepared  a  comprehensive  and  valuable  report. 

It  was  understood  that  the  general  purpose  of  the  board  in  pro- 
viding for  the  investigation  of  rates  was  to  secure  the  facts  to  be 
considered  in  determining  a  policy  of  rate  control  for  the  period  of 
the  war,  and  of  rate  regulation  after  the  war.  The  period  of  active 
warfare  having  come  to  an  end  while  this  investigation  was  in 
progress,  the  data  secured  have  significance  with  regard  to  future 


OCEAN  RATES  AND  TERMINAL  CHARGES.  7 

rate  regulation  rather  than  with  reference  to  the  making  of  rates 
incident  to  the  war-time  control  of  shipping.  The  Shipping  Board 
met  the  problems  of  rate  making  and  rate  control  during  the  period 
of  the  war,  in  accordance  with  each  situation  as  it  developed.  The 
time  has  now  come  for  the  formation  of  the  definite  policy  of  future 
rate  regulation  in  so  far  as  such  regulation  is  imposed  upon  the 
board  by  the  shipping  act  of  September  7,  1916.  This  report  sug- 
gests a  policy  of  rate  regulation,  and  recommends  an  organization 
for  giving  effect  to  that  policy. 


#1 


CHAPTER  II. 

REQUISITION  RATES. 

The  rates  which  the  Shipping  Board  has  paid  for  vessels  requisi- 
tioned were  announced  by  the  board  September  27,  1917,  the  rates 
to  be  effective  October  15,  1917.     The  scale  adopted  was  as  follows: 

REQUISITION  RATES. 

(These  rates  apply  to  full  power  driven  vessels  operating  under  the  requisition 
charter.) 

I.  Cargo  Ships  and  Tankers.   . 

1.  Ships  operating  under  "  Time  form." 

Tons  dead- weight  capacity:  ton  ixjr  mSifh.* 

Over  10,000 $6.75 

8,001-10,000 6. 00 

6,001-8,000 6. 25 

4,001-6,000 6.50 

3,001-4,000 6.75 

2,500-3,000 7.00 

Vessels  of  speed  in  excess  of  11  knots  to  be  allowed  50  cents  per  ton  dead  weight 
per  month  for  each  knot  or  part  of  a  knot  over  11  knots. 

2.  Ships  operating  under  "Bare  boat  form." 

Per  dead-weight 
ton  per  month. 

TJp  to  and  including  11  knots i $4. 15 

For  each  knot  or  part  of  knot  over  11  knots 50* 

II.  Passenger  Ships. 

1.  Ships  operating  on  *'  Time  form." 

Glass  A. — Ships  with  permanent  accommodations  for  more  than  150 

_  Per  ton  gross 

passengers :  register  per  month. 

Over  10  and  not  exceeding  11  knots $9. 00 

Over  11  and  not  exceeding  12  knots 9. 50 

Over  12  and  not  exceeding  13  knots 10. 00 

Over  13  and  not  exceeding  14  knots 10. 50 

Over  14  and  not  exceeding  15  knots 11. 00 

Over  15  knots 11. 50 

Class  B:  Ships  with  permanent  accommodations  for  from  75  to  150 

Per  ton  groas 
sengers :  register  per  month . 

Over  10  and  not  exceeding  11  knots $8.  00 

Over  11  and  not  exceeding  12  knots 8.  50 

Over  12  and  not  exceeding  13  knots 9. 00 

Over  13  and  not  exceeding  14  knots 9.  50 

Over  14  and  not  exceeding  15  knots 10. 00 

Over  15  knots 10. 50 

8 


OCEAN  RATES  AND  TERMINAL  CHARGES.  9 

2.  Ships  operating  under  'bareboat  form."  reg^S/^rKth: 

Up  to  and  including  11  knots $5.  75 

For  each  knot  or  part  of  knot  over  11  knots 50 

The  above  rates  will  govern. — 

1.  All  vessels  requisitioned  under  the  general  order  of  October  12,  1917. 

2.  All  vessels  individually  requisitioned  by  the  Shipping  Board  before  October  12, 

1917. 
The  rates  are  subject  to  revision  by  the  Shipping  Board  at  intervals  of  90  days 

(commencing  Oct.  15,  1917). 

Action  looking  toward  a  change  in  the  foregoing  rates  was  taken 
in  the  spring  of  1918  when  the  board  annoimced  a  reduction,  effective 
June  1,  of  50  cents  per  dead-weight  ton  per  month  in  the  bareboat 
rate.  Objection  having  been  raised  to  this  reduction,  the  board  post- 
poned the  change,  and  the  Law  Division  was  requested  to  make  an 
investigation  of,  and  submit  a  report  upon,  requisition  rates.  The 
Law  Division  asked  the  Kate  Investigation  to  secure  the  information 
needed  to  pass  upon  the  reasonableness  of  the  scale  of  requisition 
rates  in  force.  In  response  to  that  request,  the  subject  was  studied 
by  the  Rate  Investigation,  with  the  assistance  of  the  contract  depart- 
ment of  the  Division  of  Operations;  and  on  the  8th  of  November, 
with  the  approval  of  the  Law  Division,  there  was  submitted  to  the 
Director  of  the  Division  of  Planning  and  Statistics,  for  transmission 
to  the  board,  a  memorandum  containing  the  following  schedule  of 
requisition  rates,  which  were  recommended  for  adoption  by  the  board. 

NEW  SCALE  OF  REQUISITION  RATES. 

Time  Form  op  Requisition  Charter. 

Steel  cargo  vessels  and  tankers.  Per  dead-weight 

^  ton  per  month. 

Over  10,000  tons  dead-weight,  time  form  of  requisition  charter $5.  25 

8,001-10,000  tons  dead-weight,  time  form  of  requisition  charter 5.  50 

6,001-8,000  tons  dead-weight,  time  form  of  requisition  charter 5.  75 

4,001-6,000  tons  dead-weight,  time  form  of  requisition  charter 6.  00 

3,001-4,000  tons  dead- weight,  time  form  of  requisition  charter 6.  25 

2,501-3,000  tons  dead-weight,  time  form  of  requisition  charter 6.  50 

2,500  and  under 6.  75 

In  addition  to  the  above  rates,  the  owner  will  be  reimbursed  for  all  proper  war 
bonuses  paid  to  officers  and  crews  and  for  all  proper  increases  in  wages  over  the  standard 
wage  scale  established  by  the  United  States  Shipping  Board  as  of  May  4,  1918. 

Vessels  of  speed  in  excess  of  11  knots  will  be  allowed  15  cents  per  dead-weight  ton 
per  month  for  each  knot  or  part  of  a  knot  over  11  knots. 

Passenger  steamers. 

There  will  be  only  one  class  of  passenger  steamers,  instead  of  two,  as  heretofore. 
Steamers  with  a  capacity  of  over  75  passengers  will  be  regarded  as  passenger  vessels. 
If  a  passenger  vessel  would  receive  a  greater  hire  at  the  rate  for  steel  cargo  vessels  and 
tankers,  her  hire  will  be  paid  at  that  rate. 

Time  form  of  requisition  charter,  $8  per  ton  gross  register  per  month. 


M 


10  OCEAN  RATES  AND  TERMINAL  CHARGES. 

In  addition  to  the  above  rate,  the  owner  will  be  reimbursed  for  all  proper  war 
bonuses  paid  to  officers  and  crews  and  for  all  proper  increases  in  wages  over  the  standard 
wage  scale  established  by  the  United  States  Shipping  Board  as  of  May  4,  1918. 

Vessels  of  speed  in  excess  of  11  knots  will  be  allowed  15  cents  per  ton  gross  register 
per  month  for  each  knot  or  part  of  a  knot  over  11  knots.  This  allowance  will  not 
stop  at  15  knots,  as  heretofore. 

Bareboat  Form  op  Requisition  Charter. 

Steel  cargo  vessels  and  tankers.  Per  dead- weight 

tan  per  montn. 

Up  to  and  including  11  knots $3.  35 

For  each  knot  or  part  of  a  knot  over  11  knots 15 

Passenger  steamers.  Per  ton  gross 

register  per  month. 
Up  to  and  including  1 1  knots $4.  35 

For  each  knot  or  part  of  knot  over  11  knots 15 

The  memorandum  recommending  the  foregoing  revised  schedule  of 
rates  was  submitted  within  a  few  days  of  the  signing  of  the  armistice, 
and  the  matter  of  requisition  rates  ceased  to  be  of  pressing  importance. 
For  that  reason,  doubtless,  no  change  has  been  made  in  the  original 
scale  of  compensation  for  requisitioned  vessels. 

The  facts  considered  in  arriving  at  the  rates  contained  in  the  pro- 
posed scale  may  have  more  than  an  historical  value  for  those  who 
may  be  questioned  as  to  the  equity  of  the  requisition  rates  that  have 
been  paid  by  the  Shipping  Board  or  as  to  the  liberality  of  the  charter 
rates  which  the  board  has  paid  the  owners  of  neutral  vessels  chartered 
to  the  United  States  Navy  during  the  war. 

The  memorandum  of  November  8,  1918,  containing  the  proposed 
scale  of  requisition  rates  and  the  reasons  for  the  rates  reconmiended, 
is  made  Appendix  I  of  this  report.  To  that  memorandum  is  added 
A  simMnary  of  the  rates  paid  by  the  British  Government  for  the 
vessels  which  it  requisitioned. 


CHAPTER  III. 
OCEAN  CHARTER  AND  FREIGHT  RATES. 

In  controlling  or  regulating  ocean  charter  and  freight  rates,  action 
in  a  particular  instance  or  in  determining  a  general  policy  ought 
presumably  to  be  taken  with  a  knowledge  both  of  the  rates  in  force 
at  the  time  the  action  was  taken  and  of  the  charges  that  had  pre- 
vailed for  an  antecedent  period  of  reasonable  length.  The  Govern- 
ment authority  that  changes  rates  should  know  what  it  is  changing. 
Such  information  can  be  readily  commanded  only  when  a  rate  or 
tariff  file  can  be  consulted. 

Comparatively  few  ocean  carriers  engaged  in  international  trade 
print  their  tariffs.  The  regular  lines  operating  between  the  United 
States  and  the  West  Indies  and  Mexico  publish  their  rates,  and  there 
are  printed  tariffs  applying  to  the  west  coast  of  South  America. 
A  few  trans-Pacific  rates  are  also  published.  American  lines  oper- 
ating coastwise  and  to  Alaska  have  printed  tariffs,  but,  for  most  of 
the  foreign  trade  of  the  United  States,  ocean  carriers — even  those 
having  regular  line  services — operate  without  printed  tariffs.  No 
tariffs  of  charter  rates  are  published,  charter  rates  always  being 
matters  of  individual  bargaining.  Carriers  operating  line  vessels 
feel  free  to  vary  their  rates  at  will,  either  by  individual  action  or  in 
conference  with  rivals,  and  to  make  such  contracts  with  shippers 
as  may  seem  best  in  view  of  the  momentary  conditions  of  competition 
or  of  the  conference  agreements  which  they  may  have  promised  to 

observe. 

A  file  of  ocean  tariffs,  such  as  can  be  made  of  railroad  tariffs,  being 
impossible,  the  only  means  of  ascertaining  what  ocean  rates  are  now 
in  force  or  have  been  chained  is  to  secure  special  reports  from  the 
carriers  and  to  compile  or  catalogue  the  rates  reported.  To  keep 
such  a  compilation  up  to  date  is  somewhat  expensive,  but  a  com- 
pilation of  ocean  rates  would  seem  to  have  the  same  relation  to  the 
regulation  of  such  charges  as  a  file  of  railroad  tariffs  has  to  the  regu- 
lation of  railroad  charges.  If  the  Government  is  to  regulate  the 
rates  of  carriers  by  water,  as  provided  for  by  the  shipping  act  of  1916, 
or  as  may  possibly  be  required  by  future  l^islation,  a  compilation 
or  file  of  the  rates  subject  to  regulation,  or  even  subject  to  scrutiny 
or  supervision,  seems  necessary. 

In  the  prosecution  of  this  investigation,  three  rate  compilations 
have  been  made,  (1)  the  rates  that  were  fixed  by  authority  of  the 
Shipping  Board  and  those  that  have  been  fixed  by  the  British  and 
French  Governments,  (2)  representative  charter  rates  for  1914,  1915, 

11 


-^TTT- 


12 


OCEAX  RATES  AND  TERMINAL  CHARGES. 


J 
I 


!  .fl 


1916,  1917,  and  1918,  (3)  freight  rates  for  the  year  July  1,  1917,  to 
June  30,  1918,  on  ''general  cargo''  and  leading  commodities  at  the 
Atlantic  and  Gulf  ports  of  the  United  States,  and  freight  rates  for 
the  same  period  on  all  commodities  at  American  Pacific  ports. 

The  cataloguing  of  rates  fixed  by  the  Shipping  Board  and  the 
British  and  French  Governments  was  easily  done.  While  useful  for 
reference,  this  file  did  not  contribute  materially  to  the  information 
in  the  possession  of  those  branches  of  the  board  that  are  concerned 
with  making  rates.  The  catalogues  of  charter  and  freight  rates, 
compiled  from  data  in  the  reports  received  from  carriers,  contain  a 
record  that  is  both  of  present  assistance  and  of  probable  future  value. 

Charter  rates  to  and  from  the  ports  of  the  Atlantic  and  Gulf 
seaboards  of  the  United  States  were  compiled  for  a  period  beginning 
with  1914  and  ending  with  August  31,  1918.  For  the  purpose  of  the 
present  investigation,  it  was  not  deemed  necessary  to  compile  charter 
rates  at  the  Pacific  ports  of  the  United  States.  The  aim  was  to 
compile  a  sufficient  number  of  rates  for  each  year  to  show  the  general 
level  and  the  range  of  rates  before  and  during  the  European  war. 
The  card  file  *  to  the  end  of  August,  1918,  contains  695  time  charter 
rates  and  1,461  trip  charter  rates — 2,156  in  all.  To  these  were 
subsequently  added  representative  rates  for  the  last  four  months 
of  1918,  in  order  that  the  catalogue  might  show  the  trend  of  rates 
past  the  period  of  actual  war. 

This  compilation  was  made  from  information  obtained  from 
Bennet  Hvoslef  &  Co.,  18  Broadway,  Xew  York  City.  They  kindly 
loaned  their  records  from  January  1,  1914,  to  August  31,  1918. 
The  data  thus  secured  was  supplemented  by  information  ])rocured 
by  personal  interviews  with  the  company's  officials,  and  transcribed 
upon  cards.  A  card  index  was  compiled,  containing  for  each  charter 
a  card  stating  the  "trade,"  delivery,  commodity,  date  charter  closed, 
trip  or  period,  rate  per  unit,  name  of  ship,  flag,  net  registered  tonnage, 
motive  power  of  vessel,  and  name  of  charterer.  Lloyd's  Register  of 
Shipping  was  used  when  necessary  to  supplement  the  data  regarding 
the  vessels  Hsted  in  the  company's  record  of  charters  fixed. 

To  show  the  general  average  of  charter  rates  between  the  same 
ports,  and  for  each  year  of  the  period,  summaries  were  prepared  on 
appropriately  designed  forms,  there  being  one  set  of  forms  for  time 
charters  and  another  set  for  trip  charters.  The  summaries  also  group 
the  rates  by  trades,  the  rates  being  recorded  from  the  North  and 
South  Atlantic  ports  of  the  United  States  to  Europe,  Africa,  Asia, 
Australia,  South  America,  the  West  Indies,  and  Canada,  and  to  the 

» In  the  card  indices,  both  of  charter  rates  and  of  freight  rates,  export  and  import  rates  have  been  filed 
separately,  and  the  classification  of  rates  for  each  year  is  as  follows: 
I.  Ports  of  United  States,  alphabetically  arranged. 
A.  Continents,  alphabetically  arranged. 

1.  Foreign  ports,  alphabetically  arranged. 

(c)  Commodities,  alphabetically  arranged. 


OCEAN  BATES  AND  TERMINAL  CHARGES. 


13 


appropriate  subdivisions  of  these  sections  of  the  world.  Charter 
rates  for  some  commodities  moved  coastwise  between  the  two  sea- 
boards of  the  United  States  were  also  compiled  and  summarized. 
A  study  of  these  averages  indicates  the  extent  to  which  charter  rates 
increased  from  the  beginning  of  1914  to  the  latter  part  of  1918. 
These  averages  probably  afford  the  best  possible  index  obtainable 
of  the  effect  of  war  conditions  and  scarcity  of  tonnage  upon  ocean 
rates. 

Appendix  III  reproduces  sample  cards  from  the  index  file  of  charter 
rates,  also  sample  sheets  from  the  smnmary  of  charter  rates  by  years 
and  trades. 

The  increases  in  charter  rates  from  the  beginning  of  1914  to  the  end 
of  1918  are  illustrated  by  the  following  brief  table,  stating  rates 
upon  a  few  of  the  more  important  commodities.  The  rates  in  each 
case  are  not  the  actual  rates,  but  the  averages  for  the  year. 

Table  showing  advances  in  charter  rates  on  typical  commodities. 

(The  rates  stated  are  averages  for  the  year.) 

STEAM. 


Commodity. 


Coal,  per  ton 

Grain,  per  quarter 

Cotton,  per  100  pounds. 
Petroleum,  per  case  — 
General  cargo,  per  ton.. 

Nitrate,  per  ton 

Sogar,  per  100  poimds. . 
Ore,  i)er  ton 


Coffee,  per  bag 

Mahogany,  per  M  feet. 


Txade. 


nited  States-River  Plate 

United  Siates-Mediterranean 

nited  States-French  Atlantic... 
United  States-United  Kingdom... 
United  States-French  Atlantic — 
United  States- United  Kingdom... 

f""  nited  States-Australia 
nited  States-Africa 
nited  States-South  America 
nited  States-Europe 

South  America-United  States 

South  America-United  Kingdom 
(west  coast). 

Cuba-United  Kingdom 

Cuba-United  States 

British  India^United  States 

Spain-United  States 

South  America-United  States 

Africa-United  States 


1914 


$3.78 
4.68 
.73 
.63 
1.04 
.65 
.26 
.26 


7.20 
5.21 


.30 


4.92 

2.08 

.25 


1915 


57.91 
10.16 
2.59 
2.54 
1.91 
1.56 
1.20 
1.00 


16.80 
11.93 
18.30 

.59 

.21 

12.60 

3.29 


1916 


1917 


$17.93 

27.90 

3.63 

3.22 

3.66 

3.25 

1.52 

1.46 

18.00 

4a  20 

25.10 


$18.60 


1918 


$19.50 


.44 

3L20 

4.20 

1.00 

122.00 


6.75 


29.52 


35.00 
66.67 
30.44 


.43 


5.76 

1.67 

128.00 


40.00 
40.00 


iSaU. 


The  index  file  and  the  smnmary  sheets  of  charter  rates  also  show 
in  a  striking  way  the  great  fluctuations  in  rates  during  the  period  of 
the  war.  These  fluctuations  imposed  a  great  handicap  upon  business 
and  placed  heavy  burdens  upon  the  buyers  and  users  of  commodities. 
The  policy  of  Government  control  of  rates  that  was  adopted  is  fully 
justified  by  the  facts  shown  in  this  record  of  charter  rates.  Indeed, 
the  showing  would  indicate  that  the  Government  might  properly 
have  gone  further  than  it  went  in  the  standardization  or  stal^ilization 
of  ocean  rates. 

Freight  rates  are  often  charter  rates.  The  owner  or  time  charterer 
of  a  vessel  that  transports  a  full  cargo  usually  charges  the  shipper  a 
rate  based  on  the  cargo.  The  shipper  has  the  service  of  a  vessel,  for 
which  service  he  pays  a  freight  rate  which  is  the  charter  rate.     The 


14 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


1& 


basis  of  time  charter  rates,  on  the  contrary,  is  the  tonnage  of  the 
vessel — ^usually  the  dead-weight  tonnage  or  carrying  capacity,  in  the 
case  of  a  frei^t  vessel,  and  the  gross  register  tonnage  if  the  vessel  is  a 
passenger  ship.  There  are  also  lump-sum  charters,  the  payment  being 
a  fixed  sum  per  month  or  for  a  voyage. 

Line  vessels,  whether  freighters  or  combination  freight  and  passenger 
ships,  charge  commodity  or  "general  merchandise ''  or  '^ general  cargo " 
freight  rates,  which  are  usually  based  upon  a  unit  of  weight  or  space, 
i.  e.,  a  ton,  a  hundred  pounds,  a  cubic  foot,  or  the  ''measurement  ton," 
which  is  most  often  40  cubic  feet.  The  freight  charge  may  also  be 
per  customary  package  or  unit,  as  per  case,  barrel,  or  sack,  in  which 
case,  however,  the  rate  is  indirectly  determined  by  the  weight  of  or 
space  occupied  by  the  commodity  unit.  For  many  articles,  possibly 
for  the  majority,  rates  are  quoted  weight  or  measurement  (W/M), 
ship's  option,  the  carrier  reserving  the  right  to  levy  his  charges  upon 
the  basis  or  unit  that  will  produce  the  larger  revenue. 

The  compilations  of  ocean-freight  rates  that  have  been  made 
necessarily  include  both  rates  paid  for  bulk  cargoes  (which  are, 
in  effect,  trip-charter  rates)  and  rates  applying  on  the  far  larger 
number  of  commodities  that  are  not  ordinarily  shipped  as  full- 
vessel  cargoes.  A  compilation  of  ocean  rates  must  also  necessarily 
include  both  charter  rates  (payments  for  the  use  or  service  of  an 
entire  vessel)  and  freight  rates  generally.  As  explained  above, 
representative  charter  rates  at  the  Atlantic  and  Gulf  ports  have 
been  compiled  and  summarized.  Another  and  much  larger  file  has 
been  made  of  freight  rates  in  general. 

This  investigation  of  freight  rates  having  been  started  in  June, 
1918,  it  was  decided  to  compile  freight  rates  for  the  12  months 
ending  June  30,  1918.  The  compilation,  indexing,  and  summarizing 
of  ocean  rates  at  Atlantic  and  Gulf  ports  was  under  the  direction 
of  Asst.  Prof.  T.  W.  Van  Metre,  and  the  work  was  done  at  New 
York.  The  expert  advice  of  Mr.  Harry  Fowler,  a  man  experienced 
in  the  business  of  freight  brokerage  and  freight  forwarding,  was  of 
great  assistance.  It  was  considered  impracticable,  and  for  the 
purposes  of  the  investigation  unnecessary,  to  compile  ocean  rates 
upon  every  one  of  the  many  commodities  comprised  in  the  export 
and  import  trade  of  the  United  States  at  Atlantic  and  Gulf  ports. 
To  bring  the  inquiry  within  reasonable  limits  and  at  the  same  time 
to  secure  information  that  would  be  representative  of  all  ocean- 
freight  traffic  at  Atlantic  and  Gulf  ports,  rates  were  obtained  upon 
''general  cargo,"  29  important  special  commodities,  and  7  other 
commodities  ordinarily  handled  as  ''complete  or  bulk  cargo.'* 

The  ocean  carriers  at  New  York  and  some  of  the  principal  carriers 
at  other  Atlantic  ports  and  at  Gulf  ports  were  requested  to  report 
the  high,  low,  and  monthly  average  rate  upon  each  of  th^  designated 


commodities  for  each  quarter  of  the  year  ending  June  30,  1918. 
The  rates  were  reported  upon  appropriate  forms,  and  from  the 
reports  received  from  the  companies  a  card  file  or  index  of  the  rates 
was  made.  This  index  includes  4,916  rates  on  exports  and  974 
rates  on  imports.  The  manner  in  which  the  investigation  was  car- 
ried out  is  described  in  a  report  submitted  by  Dr.  Van  Metre  under 
date  of  December  16,  1918.  This  statement  is  reproduced  as 
Appendix  IV  to  this  report. 

As  is  stated  in  Dr.  Van  Metre's  report,  there  was  "wide  fluctuation 
of  commercial  freight  rates  during  the  year  ending  June  30,  1918, 
with  the  trend  of  change  steadily  upward."  The  following  table  of 
rates  upon  a  limited  nxmiber  of  important  exports  indicates  the 
fluctuations  and  particularly  the  large  increase  in  rates  during  the 
latter  part  of  the  12  months'  period: 

Average  ocean-freight  rates  on  selected  commodities  exported  from  New  York,  New  Orleans, 

and  Savannah  to  designated  foreign  ports. 

Quarterly— July  1,  1917,  to  June  30,  1918. 

GENERAL  CARGO. 


FROM  NEW  YORK  TO— 


Algoa  Bay,  Africa 

Athens,  Greece 

Barcelona,  Spain 

Buenos  Aires,  South  America. 


Capetown,  Africa 

Cadiz,  Spain 

Christiania,  Norway . . 

Freemantle,  Australia. 

Genoa,  Italy 


Habana,  Cuba. 


Havre,  France 

Hongkong,  China. 
Lisbon,  Portugal. 


Liverpool,  England. 


Manila,  P.  I 

Singapore,  Straits  Settlements. 

VladivostoK,  Siberia 

"Yokohama,  Japan 


FROM  NEW  ORLEANS  TO— 


Habana,  Cuba 

Havre,  France 

Liverpool,  England. 
Valparaiso,  Chile , . . 


FROM   SAVANNAH  TO — 


Genoa,  Italy 

Liverpool,  England. 


Unit. 


W/M.. 

rcu.  ft. 
m/M.. 

1 100  lbs. 

W/M.. 
fCu.  ft., 
m/M.. 
[W 

W/M.. 

W/M.. 
fCu.ft., 
UOOlbs. 

W/M.. 
fCu.ft- 
UOOlbs. 
I  W/M.. 
Wft.. 
llOOlbs. 

rw/M.. 

\Cu.  ft.. 

W/M... 


Cu.ft. 
...do 
100  lbs. 

W/M.. 
W/M.. 
W/M.. 
W/M.. 
W/M.. 


W.... 
W/M. 

W/M. 
W/M. 


100  lbs. 
do. 


July-Sep- 
tember, 
1917. 


S60.60 


47.50 

L31 

70.00 

55.59 

60.00 

49.00 

1.69 

3.50 

52.50 

3.27 

6.69 

n.25 

.375 

.76 

77.05 


October- 
December, 
1917. 


14.25 


8.00 
51.00 

1.02 
40.67 
39.71 
60.00 


L75 

3.50 

60.00 

3.67 

7.13 

1L25 

.375 

.75 

76.67 


40.00 

100.00 

2.75 

L74 

3.28 

U4.28 

37.17 

43.33 

47.50 

37.50 


as.  87 


January- 
March, 
1918. 


S55.00 

.74 

32.50 

32.28 


9.60 
25.03 


8.38 
3.23 


38.33 

100.00 

2.75 

1.97 

3.49 

U4.28 

37.50 

40.00 

47.50 

32.50 


26.87 


I 


L75 

3.50 

60.00 

3.97 

8.16 

n.25 

.375 

.75 

96.67 

5.00 

40.00 

110.00 

2.75 

2.75 

5.69 

U9.64 

40.00 

45.00 


32.50 


26.87 


9.60 
25.03 


8.75 
3.23 


19.80 
25.03 


3.47 


April- 
June, 
1918. 


S25a00 


72.50 
.81 
35.00 
3^25 
60.00 


1.75 
3.50 

60.00 
4.69 
9.82 

1L25 
.375^ 
.75 

60.33 


50.00 

140.00 

4.00 

3.50 

7.56 

U9.64 

45.00 

48.33 


43.13 


26.87 
38.00 
19.80 
25.03 


6.68 
3.22 


» British  Ministry  rates. 


16 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


Average  ocean-freight  rates  on  selected  commodities  exported  from  New  Yorlc,  New  Orleans, 
and  Savannah  to  designated  foreign  ports — Continued. 


QuAETEELT— July  1, 1917,  TO  June  30, 1918. 
COTTON. 


FROM  NEW  YORK  TO— 


Batavia,  Dutch  East  Indies . . 
Buenos  Aires,  Soutli  America. 

Christiania,  Norway 

Oenoa,  Italy 

Havre,  France 

Lisbon,  Portugal 

Liverpool,  England 

Marseille,  France 


Unit. 


FROM  NEW  ORLEANS  TO— 


Barcelona,  Spain  — 
Christiania,  Norway, 

Genoa,  Italy 

Havre,  France 

Liverpool,  England. 


FROM  SAVANNAH  TO— 


Barcelona,  Spain. . . 

Oenoa,  Italy 

Liverpool,  England 


W/M.. 

W 

100  lbs. 
....do. 
....do. 

do. 

f. . .  -do. 

iw , 

100  lbs. 


-do. 
-do. 
.do. 
.do. 
-do. 


July-Sep- 
tember, 
1917. 


$38.00 


October- 
December, 
1917. 


6.00 
8.00 
5.55 
7.38 
4.67 
19.62 
10.00 


3.93 
5.00 


6.50 
5.46 


.do. 
.do. 
.do. 


5.25 


S6.00 
8.46 
4.00 
9.00 
5.25 

19.52 


January- 
March, 
1918. 


130.00 
6.00 
7.88 
5.00 
7.00 
6.21 

119.64 


1 


5.55 


6.10 


4.25 
8.67 


FLOUR. 


FROM  NEW  YORK  TO- 


Athens,  Greece 

Batavia,  Dutch  East  Indies. 

Christiania,  Norway , 

Genoa,  Italy , 

Habana,  Cuba 

Lagos,  West  Africa 

Liverpool,  England 

Rio  Janeiro,  South  America. 

Valparaiso,  South  America. . 


FROM  NEW  ORLEANS  TO— 


Genoa,  Italy , 

Habana,  Cuba , 

Havre,  France , 

Liverpool,  England 

Valparaiso,  South  America. 


FROM  SAVANNAH  TO— 


Habana,  Cuba 

Liverpool,  England. 


Cu.  ft.. 
W/M.., 
100  lbs. 

do. 

W 

W/M... 

W 

Cu.ft.. 

r — do. 

iw 


$38.00 

2.79 

6.34 

8.75 

20.40 

n.32 

1.06 

1.13 

16.88 


W 

w 

100  lbs... 
Long  ton. 
W 


100  lbs. 
W 


9.25 

2.50 

13.20 

16.88 


$4.00 


3.00 

6.00 

8.75 

20.40 

n.32 


1.09 
16.88 


9.50 
4L00 
13.20 
16.88 


LUBRICATING  OIL. 


FROM  NEW  YORK  TO— 


Algoa  Bay,  Africa. 
Athens,  Greece . . . . 


Auckland,  New  Zealand 

Batavia,  Dutch  East  Indies. 


Buenos  Aires,  South  America. 


W/M.. 

riooibs. 

\cu.  ft.- 
W/M.., 
W/M... 
cu.ft.., 
W/M... 
W 


$20.00 

38.00 

1.25 

80.00 


$30.00 
8.25 


.87 J 
40.00 
42.50 


1  British  Ministry  rates. 


6.00 
6.25 


8.95 


$3.00 

6.25 

8.75 

27.00 

21.42 


1.09 
16.88 


150.00 
9.50 


24.00 
16.88 


2L60 


$0.75 
30.00 


April- 
June, 
1918. 


$6.00 
10.33 

7.38 
15.75 

5.25 
119.64 


6.00 


15.00 
6.00 
6.25 


$2.55 

7.00 

8.75 

27.00 

2L42 


L09 
16.88 


9.50 


24.00 
16.88 


.60 
2L60 


$6.25 


.81 
37.50 
32.50 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


17 


Average  ocean-freight  rates  on  selected  commodities  exported  from  New  York,  New  Orleans , 
and  Savannah  to  designated  foreign  ports — Continued. 

Quarterly— July  1,  1917,  to  June  30,  1918. 

LUBRICATING  OIL— Continued. 


Unit. 


FROM  NEW  YORK  TO— 


Capetown,  Africa — 

Cadiz,  Spain 

Christiania,  Norway. 
Genoa,  Italy 


Habana,  Cuba 

Hongkong,  China. . , 
Lagos,  West  Africa. 


Lisbon,  Portugal. 


Liverpool,  England 

Manila,  P.  I 

Marseille,  France 

Singapore,  Straits  Settlements. 
Valparaiso,  South  America.... 
Yokohama,  Japan 


FROM  NEW  ORLEANS  TO— 


Habana.  Cuba 

Valparaiso,  South  America. 


July-Sep- 
tember, 
1917. 


W/M.. 
bbL... 
100  lbs. 
do. 


nop  lbs. 

W/M.. 

W/M.. 

100  lbs. 

bbL.... 

cu.ft.., 

100  lbs. 

W 

"W/M... 

bbl 

100  lbs. 

W/M... 
/cu.ft... 
\W/M... 

W/M... 


$15.00 

4.19 

6.53 

10.00 

.60 

30.00 

21.40 

4.38 

25.00 


October- 
December, 
1917. 


2.88 

119.04 

30.00 

27.75 


W..., 

W/M. 


30.00 

.60 

18.75 

30.00 


10.00 
ia75 


$4.25 
6.84 

10.00 
.50 

30.00 

2L40 
5.00 


19.04 


7.25 

30.00 

.62 

18.75 

30.00 


10.00 
1&75 


MACHINERY. 


FROM  NEW  YORK  TO— 

Algoa  Bay,  Africa 

Barcelona,  Spain 

Batavia,  Dutch  East  Indies 

Buenos  Aires,  South  America.... 

Cape  Town,  Africa 

Christiania,  Norway 

Genoa,  Italy 

Habana,  Cuba 

Havre,  France 

Lagos,  West  Africa 

Liverpool,  England 

Manila,  P.  I 

Marseille,  France 

Piraeus,  Greece 

Valparaiso,  South  America 

Vladivostok,  Siberia 

FROM  NEW  ORLEANS  TO— 

Buenos  Aires,  South  America.... 

Habana,  CuMi 

Liverpool,  England 

Valparaiso,  South  America 


W/M.. 

rr.M.. 
\T.w.. 

W/M.. 
feu.  ft.., 

V/M.. 

riOOlbs. 
cu.ft.-, 
cu.ft.., 
100  lbs. 
IW/M... 
W/M... 
100  lbs. 
cu.ft... 
W/M... 
W/M... 
[W/M... 
cu.ft... 
.100  lbs. 
W/M... 
/Too.... 
Vcu.ft... 


(100  lbs. 
cu.ft.., 
W/M.., 
W/M... 


$49.75 

49.25 

38.00 

1.79 

70.00 


3.3S 

1.69 

3.34 

7.06 

132.50 

12.50 

.625 

.3125 

79.00 

17.00 

29.64 

1.69 

3.25 


199.50 


$60.00 


L31 
42.50 


3.50 
1.75 
3.53 
7.18 
127.50 
12.50 


94.78 

17.00 

29.64 

1.92 

3.50 


202.75 


W/M 

W/M 

Long  ton.... 
W^ 


L275 
.79 
26.25 
50.00 


60.00 

12.50 

9.60 

26.25 


L275 
.70 
26.25 


12.50 
9.60 


118231—19- 


1  British  Ministry  cargo. 


January- 
March, 
1918. 


$4.25 

7.63 

10.00 

.50 

32.50 

27.00 

5.22^ 
36.00 


5.76 
28.56 
35.00 


7.76 

30.00 

.63 

18.75 

30.00 


10.00 
18.75 


$0.75 
35.00 


3.50 
1.75 
3.95 
8.33 


12.50 


93.75 
27.00 
24.40 
2.72 
5.50 
40.00 


3.75 


L275 

.71 
26.25 


12.50 
19.80 


April- 
June, 
1918. 


$50.00 


3.78 

8.45 

10.00 

.50 


34.75 


36.00 
3.50 


28.56 


9.00 


.65 
18.75 


10.00 
1&75 


$0.84 
37.50 
60.00 
3.00 
1.58 
4.72 
9.85 


12.50 


56.25 

27.00 

24.40 

3.19 

7.25 


25a  00 
L275 
.71 
26.25 


12.50 
19.80 


'3 


18 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


19 


Average  ocean-freight  rates  on  selected  commodities  exported  from  New  York,  New  OrleanSy 
and  Savannah  to  designated  foreign  ports — Continued. 


Quarterly— July  1,  1917,  to  June  30,  1918. 
STEEL  PLATES. 


FROM  NEW  YORK  TO— 


Athens,  Greece 

Batavia,  Dutch  East  Indies. 
Bombay,  India 


Buenos  Aires,  South  America. 

Capetown,  Africa 

Christiania,  Norway 

Genoa,  Italy 

Habana,  Cuba 

Havre,  France 

Lagos,  West  Africa 

Lisbon,  Portugal 

Liverpool,  England 

Marseille,  France 

Sydney,  Australia 

Valparaiso,  South  America. . . 
Yokohama,  Japsm 


FROM  NEW  ORLEANS  TO— 


Habana,  Cuba 

Valparaiso,  South  America. 


Unit. 


July-Sep- 
tember, 
1917. 


W 

W/M... 
W 

%:: 

100  lbs. 
....do. 

W 

W 

W/M.. 

W 

100  lbs. 
W 


W/M. 
W.... 

W/M. 


W. 

w. 


$35.00 
40.00 
60.00 
36.00 


3.38 

5.89 

11.25 

75.00 

18.60 

88.17 

2.60 

19.52 

105.00 

23.10 

21.76 

29.75 


10.63 
16.88 


October- 
December, 
1917. 


$180.00 


50.00 
30.00 
23^60 


3.50 

6.25 

11.25 

75.00 

18.60 


2.75 
19.52 
75.00 
24.00 
20.94 


10.63 

16.88 


January- 
March, 
1918. 


$200.00 


60.00 
35.00 


3.50 

7.13 

11.25 

75.00 

24.00 


5.00 
119.64 
120.00 


22.49 
32.50 


10.63 
16.88 


April- 
June, 
1918. 


$60.00 
36.00 


60.00 

3.00 

7.75 

11.25 

75.00 

24.00 

110.00 

5.00 

119.64 

65.00 


2L95 


10.63 
16.88 


1  British  Ministry  rates. 

The  ocean  rates  at  Pacific  ports  were  secured  from  the  carriers  by 
Mr.  W.  D.  Benson,  of  Seattle,  who  was  selected  for  this  task  because 
of  the  special  knowledge  which  he  has  secured  of  ocean  rates,  both 
in  connection  with  the  shipping  business  and  as  secretary  of  the 
Pacific  Coast-Oriental  Tariff  Bureau.  The  number  of  commodities 
handled  in  the  Pacific  trades  being  fewer  than  those  handled  at 
Atlantic  ports,  it  was  possible  to  compile  rates  on  all  commodities. 
The  compilation  of  rates  both  at  Pacific  and  at  Atlantic  and  Gulf 
ports  is  larger  and  more  nearly  complete  for  exported  than  for 
imported  commodities,  the  rates  on  exports  being  established  in  the 
United  States,  whereas  the  freight  charges  for  imports  are  ordinarily 
fixed  at  foreign  points  of  shipment.  The  card  index  on  rates  at 
Pacific  ports  includes  3,993  rates  on  exports  and  1,140  rates  on 
imports,  a  total  of  5,133.  The  manner  in  which  the  compilation  of 
Pacific  rates  was  made  and  the  more  important  facts  ascertained 
by  the  investigation  are  briefly  described  and  set  forth  in  a  memo- 
randum which  is  made  Appendix  V  to  this  report. 

The  fluctuations  in  rates  at  Pacific  ports  were  less  than  those  on 
the  Atlantic  coast,  but  the  increases  were  large,  particularly  during 
the  latter  half  of  the  year  1917,  before  Government  control  came  to 
be  general.  Some  of  the  changes  are  indicated  in  the  following  brief 
table  stating  the  rates  for  a  limited  number  of  representative  com- 
modities for  the  years  1912  to  1917  and  for  each  quarter  of  the  year 
ending  June  30,  1918. 


GENERAL  MERCHANDISE. 
[By  W/M.J 


1911 

1912 

1913 

1914 

1915 

1916 

July- 

Sep- 
tem- 
ber, 
1917. 

Octo- 
ber- 
De- 
cem- 
ber, 
1917. 

Janu- 
ary- 
March, 
1918. 

April- 
June, 

litis. 

1 

FROM  SAN  FRANCISCO  TO— 

South  America 

$15.00 
10.00 
12.00 

$20.00 

'"22.'56 
22.50 

$27.50 
17.50 
17.50 
20.00 

$25.00 

17.50 

17.50 
9s;  nn 

$25.00 
17.50 
17.50 
25.00 
2.5.00 
40.00 

27.50 
17.50 
17.50 
20.00 
20.00 

20.00 
20.00 

18.00 
20.00 

$25  00 

Mexico 

$7.00 
8.00 

21  00 

Central  America 

21  00 

Asia,  East  Coast 

$10.66 
10.00 

^  00 

Asia,  Indies 

20.00     25.00 
40.00     40.00 

i 

32.50     27.50 
17.50     17.50 
17.50     17.50 
20.00     20.00 

20.00     20.00 

i 
1 

20.00     20.00 

20.00  20.00 

f 

i 

18.001  18.00 
20  00     on  iv\ 

^.T  no 

Australasia 

12.00 

40  00 

FROM  SEATTLE  TO— 

South  America 

20.00 

27  50 

Mexico 

21.00 
21   00 

Central  America 

Asia,  East  Coast 

10.00 
10.00 

10.00 
10.00 

10.00 
10.00 

25  00 

Asia,  Indies 

25  00 

FROM  TACOMA  TO— 

Asia,  East  Coast 

25  00 

Asia,  Indies 

25  00 

FROM  VANCOUVER  TO— 

Asia,  East  Coast 

20  on 

Asia,  Indies 

2.'»  00 

1 

MACHINERY. 
[By  W/M.l 


FROM  SAN  FRANCISCO  TO- 


South  America. . 

Mexico 

Central  America. 
Asia,  East  Coast. 

Asia,  Indies 

Australia 


FROM  SEATTLE  TO— 


South  America. . 

Mexico 

Central  America. 
Asia,  East  Coast . 
Asia,  Indies 


FROM  TACOMA  TO- 


Asia,  East  Coast . 
Asia,  Indies 


FROM  VANCOUVER  TO- 


Asia,  East  Coast . 
Asia,  Indies 


$8.00 
10.00 


$8.00 
10.00 


$15.00 
17.00 
12.00 
12.00 
10.00 


$20.00 
12.00 
14.00 
20.00 
20.00 


$25.00   $25.00 


20.00 


15.00 
17.50 
20.00 
18.00 
40.00 
i 


25.00 
15.00 
17.50 
20.00 
20.00 


18.00' 
20.001 


20.00 
18.00 


15.00 
17.50 
20.00 
18.00 
40.00 


25.00 
15.00 
17.50 
20.00 
20.00 


18.00 
20.00 


20.00 
18.00 


$25.00! 
15.00 
17.50: 
20.00 
18.00 
40.00 


25.00 
15.00 
17.50 
20.00, 
20.00i 


$25.00 
18.00 
21.00 
25.00 
25.00 
40.00 


25.00 
15.00 
17.50 
25.00 
25.00 


IS.  00     20.00 
20.00     25.00 


2O.OO1 
18.00 


30.00 
25.00 


FLOUR. 
[By  weight.) 


FROM  SAN  FRANCISCO  TO— 


South  America. . 

Mexico 

Central  America. 
Australia 


$6.00 
6.00 


$13.00{ 
8.00 
8.00 

laoO; 


$20.00 
8.00 
8.00 

10.00 


$25.00 
12.50 
12.50 

$25.00 
12.60 
12.50 



$25.00 
12.50 
12.50 

$25.00 
15.00 
15.00 

20 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


21 


FLOU  R— Continued. 
|By  weight.] 


1911 

1912 

1913 

1914 

1915 

1916 

July- 
Sep- 
tem- 
ber, 
1917. 

Octo- 
ber- 
De- 
cem- 
ber, 
1917. 

Janu- 
ary- 
March, 
1918. 

April- 
June, 
1918. 

FROM  SEATTLE  TO— 

South  America 

$20.00 

$25.00 
12.50 
12.50 

$25.00 
12.50 
12.50 

$25.00 
12.50 
12.50 

$25.00 

Mexico 

12.50 

Central  America 

12.50 

Asia.  East  Coast 

$4.00 
5.50 

4.00 
6.50 

4.00 
5.50 

$3.50 
5.00 

3.50 
5.00 

3.50 
5.00 

18.00 
8.00 

8.00 
8.00 

8.00 
8.00 

15.66 

17.00 

15.00 
17.00 

15.00 

Asia.  Indies                       ...... 

*  * 

FROM  TACOMA  TO— 

Asia.  East  Coast 

17.00 
17.00 

17.00 
17.00 

20.00 
20.00 

20.00 

Asia.  Indies 

20.00 

FROM  VANCOUVER  TO— 
Asia  East  Coast       .        ... 

Asia.  Indies. .................. 

17.00 

LUMBER. 
[Per  1,000  ft.  b.  m.) 


FROM  SAN  FRANCISCO  TO— 

Mexico 

$12.50 
14.00 

$12.50 
14.00 

$15.00 
17.00 

$15.00 
17.00 

$22.50 
26.25 
40.00 

22.50 
26.25 
25.00 

$22.50 
26.25 
4a  00 

22.50 
26.25 
25.00 

$22.50 
26.25 
4a  00 

22.50 
26.25 
25.00 

$27.00 

Central  America..... 

31.50 

Asia.  Indies 

4a  00 

FROM  SEATTLE  TO— 

Mexico 

••••••• 

22.50 

Central  America......... 

26.25 

Asia.  East  Coast 

laoo 

12.00 

laoo 

13.00 
13.00 

13.00 
13.00 

13.00 
13.00 

$8.00 
12.00 

8.00 
12.00 

8.00 
12.00 

9.00 
11.00 

9.00 
11.00 

9.00 
11.00 

25.66 
25.00 

25.00 
25.00 

25.00 
25.00 

4a  00 

Asia.  Indies                  ......... 

FROM  TACOMA  TO— 

Asia,  East  Coast 

25.00 

25.00 

25.00 

30.00 

Asia.  Indies 

12.00 

laoo 

12.00 

FROM  VANCOUVER  TO— 
Asia.  East  Coast 

25.00 

25.00 

25.00 

30.00 

Asia.  Indies 

GENERAL  MERCHANDISE. 
[By  W/M.l 


TO  SAN  FRANQSCO  FROM— 

Mexico 

$iaoo 

14.00 
7.60 

$iaoo 

12.00 
8.00 

$20.66 

$13.75 
15.00 
4a  00 
50.00 

4a  00 
5a  00 

4a  00 

50.00 

4a  00 
5a  00 

$13. 75 
15.00 

4a  00 

50.00 

4a  00 

60.00 

4a  00 

60.00 

4a  00 

60.00 

$13.75 
15.00 

4a  00 

50.00 

4a  00 

60.00 

4a  00 

60.00 

4a  00 

60.00 

$13.75 

Central  America 

15.00 

Asia.  East  Coast 

$8.00 

40.00 

Asia.  Indies 

60.00 

TO  SEATTLE  FROM— 

Asia.  East  Coast 

7.50 

8.00 

8.00 

20.00 

40.00 

Asia.  Indies 

60.00 

TO  TACOMA  FROM— 

Asia.  East  Coast 

7.50 

8.00 

8.00 

20.00 

40.00 

Asia.  Indies 

60.00 

TO  VANCOUVER  FROM— 

Asia,  East  Coast 

7.50 

8.00 

&00 

20.00 

40.00 

Asia,  Indies 

60.00 

HIDES. 


TO  SAN  FRANaSCO  FROM— 


Mexico 

Central  Anerica. 
Asia,  East  Coast. 


TO  SEATTLE  FROM— 


Asia,  East  Coast. 
Asia,  Indies 


TO  TACOMA  FROM— 

Asia,  East  Coast 

TO  VANCOUVER  FROM— 

A.sia,  East  Coast 


1911 


i$12.00 

120.00 

2^60 


«8.50 


2  8,50 


S8.50 


1912 


1913 


1914 


2$8.00 


>8.00 


2  8.00 


S8.00 


1915 


'$17. 50 

120.00 

«8.00 


«aoo 


1916 


T„i„      Octo- 

^P"  I  De- 

w'  cem- 

"^^'  ber 

1917.  I  ^l 


Janu- 
ary- 
March, 
1918. 


April- 
June, 
1918. 


i$21. 00 1  $21. 00 1  $21. 00 1  $21. 00 


2  8.00 


28.00 


2$20.00 


2  20.00 


125.00  125.00  125.00 
2  60.00  2  50.00  250.00 


230.00  2  4a  00 
•58.00  »58.00 


220.00  230.00  »4aoo 


22a  00 


2  4a  00 


24a  00 


2  4a  00 

»65.00 


2  4a  00 


255.00 


125.00 
25a  00 


2  4a  00 

•65.00 


2  4a  00 


255.00 


RICE. 


FROM  SAN  FRANCISCO  TO— 

Asia.  East  Coast 

1 

! 

.1186.50 

1 

.   laso 

•$5.00 

15.00 

i$3.50 
13.50 

i$5.00 
'7.00 

i$iaoo 

115.00 

i$40.00 

i$4aooi$5aoo 

i$50.0O 

TO  SEATTLE  FROM— 

Asia.  East  Coast 

1 

I 

14a  00  150.00  150.00 
150.00  150.00  150.00 

155.00 

Asia.  Indies                 

15a  00 

TO  TACOMA  FROM— 

Asia.  East  Coast 

i 

.     16.50 

.   ia50 

15.00 

»5.00 

13.50 
13.50 

15.00 
15.00 

118.00 
118.00 

125.00 

1 
125.00  125.00 

14a  00 

TO  VANCOUVER  FROM— 

Asia.  East  Coast 

•50.00  •50.00  «50. 00 

•55.00 

RUBBER. 


TO  SAN  FRANCTSCO  FROM— 


Mexico 

Central  America. 
Asia,  East  Coast . 
Asia,  Indies 


TO  SEATTLE  FROM— 


Asia,  East  Coast. 
Asia,  Indies 


TO  TACOMA  FROM — 


Asia,  East  Coast . 
Asia,  Indies 


TO  VANCOUVER  FROM— 


Asia,  East  Coast . 
Asia,  Indies 


i$24.00 
1  24. 00! 


2$&00 


28.00 


2aoo 


28.00 


i$24.00  i$24.00 

1  24.  GO 

2  10.00  2  26.50 
2  17.60  230.00 


»iaoo 


21a  00 


21a  00 


2  26.50 


2  26.50 


2  26.50 


i$24.00  if21.00  JJ24.00  >$24.0O 

1  24. 00  '  24. 00  '  24. 00  '  24.  GO 

2  30. 00  2  75. 00  2  75. 00, 2  9a  00 
•65.00*»65.00  »95.00  »95.00 


275.00 
2  65.00 


275.00 


275.00 
265.00 


275.00 


275.00 


275.00 


295.00  295.00 


290.00 


2  90.00 


2  45.00|2  45.00  275.00  1 75.0a 


>  W. 


2M. 


•  W/M. 


22 


OCEAN  RATES  AND  TERMINAL   CHARGES. 


NOTE    ON    RATE    FILES. 

The  several  files  referred  to  in  the  foregoing  chapter  include: 

1.  Rates  established  by  the  United  States  Shipping  Board  and  by 
the  British  and  French  Governments  during  the  war  periods. 

2.  Representative  charter  rates  at  Atlantic  and  Gulf  ports.  This 
file  includes  2,156  rates. 

3.  Freight  rates  for  the  year  ending  June  30,  1918,  at  Atlantic 
and  Gulf  ports;  total  number  of  rates,  5,890. 

4.  Freight  rates  for  the  year  ending  June  30, 1918,  at  Pacific  ports; 
total  number  of  rates,  5,133. 

In  addition  to  these  files,  there  is  a  catalogue  of  vessels  that  were 
owned  or  controlled  by  the  Shipping  Board  during  1918.  Detailed 
facts  regarding  the  tonnage,  type,  ownership,  date  of  construction, 
and  operating  company  are  recorded  for  each  sliip.  These  files 
ought  to  be  of  value  for  reference,  and  if  revised  and  brought  down 
to  date  from  time  to  time  should  be  of  assistance  in  the  control  or 
regulation  of  rates. 


CHAPTER  IV. 
TERMINAL  SERVICES  AND  CHARGES. 

The  charges  for  terminal  services  are  as  much  a  part  of  the  costs 
of  ocean  transportation  as  are  the  freight  rates.  Both  the  shipper 
and  the  carrier  are  interested  in  securing  adequate  terminal  services 
at  reasonable  costs;  and  the  Shipping  Board,  in  regulating  ocean 
carriers  and  in  carrying  out  plans  for  the  development  of  the  mer- 
chant marine,  must  necessarily  give  careful  consideration  to  the 
growth  and  organization  of  terminal  facilities,  and  to  the  enforce- 
ment of  rules  and  practices  by  terminal  companies  that  will  be  fair 
to  those  they  serve. 

The  shipping  act  of  September  7,  1916,  applies  to  two  classes  of 
ocean  carriers  and  to  terminal  companies  serving  such  carriers.  By 
this  act,  the  Shipping  Board  is  given  jurisdiction  over  each  '' com- 
mon carrier  by  water  in  foreign  commerce  *  *  *  running  on  regu- 
lar routes"  and  to  each  ''common  carrier  by  water  in  interstate  com- 
merce *  *  *  engaged  in  transportation  by  water  of  passengers 
or  property  on  the  high  seas  or  the  Great  Lakes  on  regular  routes/' 
and  also,  as  regards  certain  provisions  of  the  act,  jurisdiction  over 
"other  person  subject  to  this  act,"  this  last  phrase  being  defined  by 
section  1  of  the  law  to  mean  ''any  person  not  included  in  the  term 
'common  carrier  by  water ^  carrying  on  the  business  of  forwarding, 
or  furnishing  wharfage,  dock,  warehouse,  or  other  terminal  facili- 
ties in  connection  with  a  common  carrier  by  water." 

By  section  17  of  the  act,  the  Shipping  Board  is  given  the  follow- 
ing regulatory  powers  over  terminal  companies:  "Every  other 
person  subject  to  this  act  shall  establish,  observe,  and  enforce  just 
and  reasonable  regulations  and  practices  related  to  or  connected 
with  the  receiving,  handhng,  storing,  or  deHvering  of  property. 
Whenever  the  board  finds  that  any  such  regulation  or  practice  is 
unjust  or  unreasonable,  it  may  determine,  prescribe,  and  order  en- 
forced a  just  and  reasonable  regulation  or  practice."  This  provi- 
sion of  the  act  does  not  give  the  Shipping  Board  the  power  to  pre- 
scribe the  rates  to  be  charged  for  terminal  services,  but  the  preced- 
ing section  of  the  law,  which  prohibits  unreasonable  discrimina- 
tions and  imjust  and  unfair  devices,  applies  to  "any  common  car- 
rier by  water  or  other  person  subject  to  tJiis  act.^^ 

By  the  act  of  July  18,  1918,  and  the  President's  proclamation  of 
December  3,  1918,  the  Shipping  Board  has  complete  power  to  regu- 
late the  services  and  charges  of  terminal  companies  ui^U  the  final 

23 


N 


24 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


2& 


mi 


treaty  of  peace  shall  have  been  proclaimed  and  for  a  possible  period 
of  nine  months,  thereafter  if,  in  the  judgment  of  the  President,  the 
national  interests  require  the  life  of  the  statute  to  be  continued  for 
that  time  after  the  proclamation  of  peace.  This  legislation  was 
passed  because  of  the  severe  congestion  of  traffic  at  several  ports  of 
the  United  States,  and  because  of  the  very  large  increase  that  had 
been  made  in  terminal  charges,  particularly  for  dockage  and  wharf- 
age at  certain  of  the  ports.  While  the  subject  was  under  considera- 
tion by  Congress,  and  when  it  was  evident  that  the  law  would  be 
enacted,  the  study  of  terminal  services  and  charges  was  made  a  part 
of  the  investigation  of  rates.  A  report  upon  terminal  services  and 
charges,  prepared  by  Prof.  C.  O.  Ruggles,  although  separately  pub- 
lished is  a  part  of  this  report  upon  the  investigation  of  ocean  rates. 

Part  I  of  the  report  of  Dr.  Ruggles  contains  a  general  description 
of  terminal  charges  at  the  ports  of  the  United  States,  a  comparison 
of  charges  at  diflPerent  terminals,  and  a  statement  regarding  the  ad- 
vance in  port  charges  during  the  war.  The  consequences  of  present 
policies  concerning  port  charges  and  services  are  discussed,  and 
recommendations  are  made  for  the  future  regulation  of  ports  and 
for  their  development.  Part  II,  which  comprises  the  larger  part  of 
the  report,  is  devoted  to  a  general  description  of  terminal  facilities 
and  to  a  statement  of  port  charges,  first,  at  10  important  Atlantic, 
Gulf,  and  Pacific  coast  ports,  and,  second,  at  17  others.  The  in- 
formation here  presented  is  more  complete  than  has  previously  been 
compiled.  A  request  was  received  early  in  February  from  the 
London  office  of  the  Shipping  Board  for  a  statement  of  terminal 
charges  at  the  ports  of  the  United  States,  and  a  detailed  statement 
of  charges  at  27  ports  was  copied  from  Part  II  of  Dr.  Ruggles's 
report  and  sent  to  London. 

In  discussing  the  consequences  of  present  policies  concerning  port 
charges  and  services,  Dr.  Ruggles  points  out  that  '^  private  owner- 
ship or  long-time  lease  of  piers  and  wharves  may  furnish  the  oppor- 
tunity for  favoritism  toward  certain  industries  or  carriers,  or  prevent 
the  use  of  port  facilities  in  the  most  efficient  manner.''  Attention 
is  also  called  to  the  fact  that  "the  industrial  and  commercial  uses 
of  a  port  sometimes  conffict  with  each  other.''  The  use  of  deep- 
water  frontage  at  American  ports  by  industrial  concerns  is  common 
practice,  and  it  has  had  the  effect  of  limiting  the  available  commercial 
facilities  at  some  of  the  larger  American  ports. 

Dr.  Ruggles  emphasizes  the  importance  of  bringing  about  the 
unification  of  railroad  terminal  facilities  at  aU  the  important  ports 
of  the  United  States.  He  states  that  "railroad  ownership  or  control 
of  strategic  terminal  facihties  is  the  natural  outcome  of  competition 
among  railroads";  that  "Government  control  over  railroad  rates 
has  intensified  railroad  competition  in  terminals,"  and  that  ''rail- 
roads have  vied  with  each  other  in  offering  ample  terminal  facihties, 


and  this  practice  has  resulted  in  duplication  of  expensive  terminals 
without  adequate  provision  for  their  physical  coordination."  The 
result  of  railroad  competition  at  the  ports  of  the  United  States  has 
been  that  the  railroads,  in  order  to  obtain  traffic,  have  granted 
services  which  were  wholly  or  partly  gratuitous.  It  has  been  the 
common,  although  not  universal,  practice  of  the  railroads  to  absorb 
port  terminal  charges  upon  traffic  for  which  the  rail  carrier  has  the 
line  haul;  in  some  instances,  switching,  drayage,  and  insurance 
charges  have  been  absorbed  by  the  railroads  at  terminals.  These 
practices  of  the  railroads  have  been  discussed  in  various  reports  of 
the  Interstate  Commerce  Commission  (31  I.  C.  C,  351,  408,  and  29; 
I.  C.  C,  212).  It  is  the  opinion  of  Dr.  Ruggles  that  "the  ownership 
of  port  terminal  facilities  by  a  number  of  railroads"  has  brought 
about  the  "lack  of  coordination  both  among  the  railroads  themselves 
and  between  rail  and  water  carriers;"  and  he  adds:  "It  is  a  common 
provision  in  terminal  tariffs  that  a  railroad  'does  not  obligate  itself 
to  provide  wharfage,  storage,  or  handling  for  property  which  has 
not  been  transported  or  is  not  intended  to  be  transported'  over  its 
line;  or  that  it  'reserves  the  absolute  right  to  the  use  of  its  piers  or 
docks'  *  *  *.  Such  a  practice  makes  as  many  separate  ports 
within  a  port  as  there  are  deep-water  terminals  controlled  by  the 
different  railroad  companies.  It  sometimes  means,  too,  that  there 
is  congestion  at  the  water  terminals  of  some  railroads,  while  others 
are  not  used  to  their  capacity."  Dr.  Ruggles  also  observes  that 
"the  restriction  of  strategic  port  terminal  facilities  to  its  own  use 
is  an  attempt  by  a  railroad  to  secure  the  line  haul  of  the  traffic. 
While  this  is  a  failure  to  appreciate  the  fact  that  railroads  are  common 
carriers,  it  is  the  natural  result  of  railway  competition  in  the  terminals. 
Moreover,  it  is  probably  true  that  this  competition  has  made  terminal 
charges  so  low  that  a  railroad  which  has  expensive  rail  and  water 
terminals  could  not  afford  to  permit  their  use  by  other  railroads 
unless  it  were  to  receive  more  remuneration  than  the  present  scale 
of  terminal  charges  yields." 

Another  effect  of  the  absorption  of  terminal  charges,  as  is  pointed 
out  by  Dr.  Ruggles,  is  that  the  practice  makes  it  difficult  for  States  or 
municipalities  to  maintain  self-supporting  public  piers  in  competition 
with  the  railroad  piers.  This  difficulty  has  been  emphasized  by 
statements  made  by  the  director  of  the  port  of  Boston  and  the 
director  of  wharves,  docks,  and  ferries  at  Philadelphia. 

In  his  recommendations  concerning  port  charges  and  services, 
Dr.  Ruggles  says:  "The  character  of  service  at  any  port  depends 
upon  a  large  variety  of  factors  *  *  *  but  the  big  problems  in 
all  ports  are  the  same.  First,  adequate  facilities  should  be  provided 
to  care  for  the  volume  of  traffic  offered;  second,  private  interests 
should  not  be  permitted  to  utilize  port  facilities  to  their  own  ad- 
vantage; and,  third,  there  should  be  complete  coordination  among 


^ 


26 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


I  ' 


rail  carriers  themselves,  and  between  rail  and  water  carriers." 
Concerning  the  coordination  of  rail  and  water  terminal  facilities, 
Dr.  Ruggles  states  that  "a  belt  line  railway  meets  only  part  of  the 
difficulty;  it  does  not  provide  coordination  of  rail  and  water  terminals 
*  *  *.  There  ought  to  be  complete  freedom  of  movement  of 
traffic  within  a  port  from  any  railroad  to  any  pier,  and  vice  versa." 
Dr.  Ruggles  does  not  offer  a  definite  plan  for  bringing  this  about,  but 
suggests  that  the  United  States  Shipping  Board  and  the  Interstate 
Commerce  Commission  should  jointly  seek  to  answer  the  following 
questions: 

Should  there  be  a  separately  organized  terminal  company  in  each 
of  the  important  ports  of  the  United  States  to  supersede  control 
by  various  private  concerns  and  by  individual  railroad  companies? 

Should  all  terminal  facilities  be  publicly  owned,  and  if  publicly 
owned,  should  they  be  publicly  or  privately  operated  ? 

Should  railroad  rates  to  and  from  the  ports  be  so  constructed  as 
to  divide  the  charge  for  the  line  haul  from  the  terminal  charge,  and 
the  terminal  charges  be  made  equal  to  the  costs  of  terminal  services  ? 

To  assist  in  finding  the  right  answer  to  these  questions.  Dr.  Ruggles 
recommends  the  establishment  by  the  Shipping  Board  of  a  Bureau  of 
Port  Terminal  Charges  and  Services.  It  is  recommended  that  "  this 
bureau,  in  cooperation  with  the  Interstate  Commerce  Commission  and 
local  port  authorities,  make  an  exhaustive  and  comprehensive  study 
of  all  conditions  affecting  the  efficiency  of  service  at  all  important 
ports  of  the  United  States."  It  is  also  suggested  that  a  study  be  made 
of  some  important  European  ports,  and  that  complete  data  regarding 
port  terminal  charges  be  collected  and  filed.  ''With  the  fund  of 
information  that  would  thus  be  provided,  the  Shipping  Board  would 
be  in  position  to  take  intelligent  action  with  the  Interstate  Commerce 
Commission  and  with  local  port  authorities  for  the  solution  of  port 
terminal  problems."  Dr.  Ruggles  closes  his  report  with  the  recom- 
mendation that  "there  be  provided  adequate  means  for  the  control 
of  port  terminal  charges  and  services  in  the  interests  of  commerce." 

The  main  purpose  of  the  investigation  of  terminal  services  and 
charges  has  been  to  prepare  for  the  beginning  of  such  regulation  of 
terminal  services  as  the  Shipping  Board  may  deem  to  be  its  duty  to 
exercise  in  enforcing  the  shipping  act  of  September  7,  1916,  or  such 
future  legislation  amendatory  thereto  as  may  be  enacted.  A  later 
chapter  will  consider  tKe  organization  which  it  may  be  wise  for  the 
Shipping  Board  to  create,  not  only  for  the  regulation  of  the  practices 
of  terminal  companies,  but  also  for  assisting  in  bringing  about,  in  so 
far  as  practicable,  the  unification  of  the  rail  and  ocean  terminal 
facilities  and  their  systematic  development  at  the  leading  ports  of 
the  United  States. 


CHAPTER  V. 
COSTS  AND  RATES. 

The  investigation,  as  first  planned,  included  the  ascertainment 
of  the  costs  of  freight  services  rendered  by  vessels  operated  by  or 
for  the  Shipping  Board,  i.  e.,  the  capital  and  cm-rent  expenses  per 
vessel  and  per  voyage.  The  purpose  of  this  inquiry  into  the  costs  of 
services  was  to  discover  what  revenues,  and  thus  what  minimum 
freight  rates,  were  required  to  meet  operating  expenses  and  to  yield 
a  proper  rate  of  return  on  investment. 

The  difficulties  ordinarily  confronted  in  seeking  to  determine  the 
cost  of  transportation  services,  whether  of  carriers  by  land  or  by 
water,  were  understood,  but  the  conditions  seemed  favorable  for 
securing  the  facts  as  to  the  costs  of  the  freight  services  performed 
by  the  Shipping  Board  and  its  agents.  The  Shipping  Board  was  the 
owner  of  a  large  number  of  vessels  and  was  operating  more  than  100 
of  those  vessels.  It  had  also  chartered  and  requisitioned  an  even 
larger  number  of  vessels,  the  majority  of  which  were  being  operated 
for  the  board  by  some  65  companies  with  which  the  board  had  made 
agreements  that  required,  among  other  things,  that  the  companies 
should  account  to  the  board  for  freight  receipts  obtained  and  for 
expenses,  other  than  charter  hire,  to  be  borne  by  the  Shipping  Board, 
Emergency  Fleet  Corporation. 

The  main  som*ces  from  which  information  as  to  costs  of  freight 
services  was  to  be  sought  were  the  comptroller  of  the  Shipping  Board 
and  of  its  Division  of  Operations,  the  comptroller  of  the  Emergency 
Fleet  Corporation,  and  the  companies  with  which  the  Shipping  Board, 
Emergency  Fleet  Corporation,  had  operating  agreements. 

The  comptroller  of  the  Shipping  Board,  Division  of  Operations, 
was  requested  to  furnish  cost  data  regarding: 

1.  The  maintenance  and  operating  expenses  of  vessels  operated 
directly  by  the  Shipping  Board. 

2.  The  maintenance  and  operating  expenses  for  Government 
account  of  vessels  operated  by  agents  of  the  Shipping  Board. 

3.  The  cost  of  acquisition  of  vessels  purchased  by  the  United  States 
Shipping  Board,  i.  e.,  vessels  of  which  the  comptroller  of  the  Division 
of  Operations  has  data. 

For  information  regarding  the  cost  of  vessels  constructed  by  the 
Shipping  Board,  application  was  made  to  the  comptroller  of  the 
Emergency  Fleet  Corporation  at  Philadelphia,  from  whom  figiu^es 
were  obtained  giving  the  cost  of  ships,  grouped  in  three  classes: 

1.  Partly  built  ships  taken  over  and  completed  by  the  Fleet  Cor- 
poration. 

27 


^i 


28 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


29 


hi 


m 


M 


i; 


If. 


2.  Tonnage  contracted  for  by  the  corporation  up  to  August  15, 
1918. 

3.  Tonnage  to  be  constructed  during  the  period  ending  December 

31,  1919. 

To  secure  detailed  facts  regarding  the  maintenance  and  operating 
expenses  of  vessels  operated  by  agents  of  the  Shipping  Board,  the 
Director  of  the  Division  of  Operations  called  upon  the  65  companies 
(operating  261  vessels)  with  which  agreements  for  the  operation  of 
vessels  had  been  made  by  the  Shipping  Board  to  report  for  each  vessel 
the  expenses  of  operation  covered  by  the  ''time  form";  i.  e.,  expenses 
properly  incurred  for  owner's  account  under  the  "  time  form"  of  requi- 
sition charter.  These  expenses  did  not  include  interest,  depreciation, 
amortization,  or  profit.  The  companies,  however,  were  requested  to 
report  overhead  expenses  attributable  to  each  vessel  for  the  period 
covered  by  the  report. 

A  collateral  line  of  inquiry  was  followed  to  secure  information  by 
which  to  determine  the  rate  of  return  on  Shipping  Board  vessels 
required  to  cover  interest,  depreciation,  and  proper  amortization. 
The  builders  of  the  vessels  that  had  been  requisitioned  by  the  Shipping 
Board  were  asked  to  state  the  cost  of  each  of  the  several  vessels. 
Reports  were  received  from  nearly  aU  of  the  shipbuilders,  and  figures 
as  to  original  cost  of  requisitioned  vessels  were  obtained.  The  prewar 
costs  of  vessels  thus  obtained  were  helpful  in  estimating  the  probable 
postwar  costs  and  values  to  which  it  would  be  desirable,  if  practicable, 
to  amortize  the  wartime  costs  of  shijiping. 

The  data  received  from  the  comptroller  of  the  Emergency  Fleet 
Corporation  as  to  the  cost  of  constructing  vessels  showed  the  average 
capital  investment  per  dead-weight  ton  which  the  United  States  was 
making  in  ships  of  different  classes;  and  on  the  27th  of  September, 
1918,  the  following  brief  report  was  made  to  the  Shipping  Board 
upon  the  ''Rate  of  return  on  investment  in  Shipping  Board  vessels  to 
cover  depreciation,  interest,  and  amortization": 

An  investigation  has  been  made  to  ascertain  the  return  upon  investment  necessary 
to  be  secured  from  cargo  vessels  owned  or  hired  by  the  Shipping  Board  to  cover 
depreciation,  interest,  and  amortization.  It  has  been  found  that  $5.10  per  dead- 
weight ton  per  month  needs  to  be  secured  on  the  average  to  cover — 

Depreciation  of  investment  to  which  amortization  is  not  applied,  at  the  rate  of 
10  per  cent  per  annum  for  the  next  three  years,  and  at  5  per  cent  thereafter; 

Interest  at  5  per  cent  per  annum;  and 

Amortization  of  33 J  per  cent  per  annum  during  the  coming  three  years  of  the  differ- 
ence between  the  present  war-time  costs  of  vessels  and  their  estimated  post-war  costs. 

Depreciation  of  the  unamortized  part  of  the  investment  at  the  rate  of  10  per  cent 
per  annum  for  the  three  years  during  which  it  is  probable  war  conditions  will  prevail 
is  at  double  the  normal  rate  of  depreciation,  and  this  rate  has  been  accepted  for  the 
probable  period  of  the  war  and  of  readjustment  thereafter,  because  of  the  hard  usage 
to  which  vessels  are  necessarily  l^eing  put  at  the  present  time. 


The  interest  rate  of  5  per  cent  per  annum  represents  the  Government's  approximate 
cost  of  securing  funds.  It  is  a  low  rate,  but  one  that  covers  the  Government's  outlay 
for  securing  capital. 

The  amortization  each  year,  for  three  years,  of  33^  per  cent  of  the  excess  of  the 
present  costs  to  the  Government  of  vessels  over  the  probable  post-war  costs  is  deemed 
advisable,  and  funds  for  this  purpose  should,  if  possible,  be  secured  from  the  freight 
rates  charged. 

It  is  respectfully  recommended  that  the  Shipping  Board  adopt  $5.10  per  dead- 
weight ton  per  month  as  the  amount  to  be  earned  from  freight  rates  on  cargo  vessels 
owned  or  hired  by  the  board  to  cover  depreciation,  interest,  and  amortization. 

The  data  and  analyses  upon  which  the  foregoing  recommendations 
were  based  were  presented  in  a  memorandum  prepared  by  Mr.  Walter 
T.  Fisher  and  which  is  made  Appendix  II  of  this  report.  The  fact 
should  be  emphasized  that  the  recommendation  that  $5.10  per  dead- 
weight ton  per  month  should  be  secured  from  freight  rates  on  cargo 
vessels  owned  or  hired  by  the  board  to  cover  depreciation,  interest, 
and  amortization  had  reference  entirely  to  conditions  created  by  the 
war.  It  is  no  longer  desirable  or  possible  for  the  Shipping  Board  to 
charge  freight  rates  that  will  yield  over  $5  per  dead-weight  ton  per 
month  in  addition  to  the  amount  necessary  to  meet  current  operating 
expenses.  Freight  rates  are  already  subject  to  competition  and  are 
much  lower  than  they  were  during  the  war,  and  it  is  no  longer  possi- 
ble to  carry  out  the  program  of  amortizing  within  a  period  of  three 
years  the  difference  between  war-time  costs  of  Shipping  Board  ves- 
sels and  their  estimated  post-war  costs. 

For  some  time  following  the  submission  of  the  above  report  and 
recommendation,  the  basic  costs  of  the  services  of  Shipping  Board 
vessels  were  determined  by  including  $5.10  per  dead-weight  ton  per 
month  as  the  amount  to  be  earned  from  freight  rates  on  Shipping 
Board  vessels,  to  cover  depreciation,  interest,  and  amortization. 
The  rapid  approach  of  peace-time  conditions  makes  it  necessary  to 
fix  rates  with  reference  to  competition  as  well  as  with  regard  to  theo- 
retically desirable  revenues. 

To  determine  the  cost  of  owning,  maintaining,  and  using  vessels 
in  the  performance  of  freight  services  it  is  necessary  to  know  what  is 
required  for  depreciation,  interest,  and  amortization,  and  also  what 
is  necessary  to  meet  actual  expenses  of  operation  and  maintenance. 
These  cost  data,  to  be  useful  for  rate-making  piu-poses,  must  be  dis- 
tributed per  vessel,  and  also  per  voyage  or  per  month.  When  this  in- 
vestigation was  undertaken  it  was  thought  that  the  comptroller  of 
the  Shipping  Board  would  be  able  to  make  these  cost  analyses.  It 
was  found,  however,  that  the  accounts  of  the  comptroller's  office 
were  in  the  process  of  reorganization,  and  it  later  developed  that  it 
was  not  until  January,  1919,  that  the  desired  cost  analyses  could  be 
made  by  the  comptroller.    This  statement  is  not  made  in  criticism  of 


ft 


30 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


31 


the  comptroller,  who  had  a  most  difficult  problem  to  work  out  and 
who  would  have  furnished  the  information  when  requested  had  it 
been  possible  for  him  to  do  so. 

As  has  been  previously  stated,  the  Division  of  Operations  sent  out 
a  questionnaire  to  secure  information  regarding  the  maintenance  and 
operating  expenses  of  vessels  operated  by  agents  of  the  Shipping 
Board.  Of  the  65  companies  with  which  agreements  for  the  operation 
of  vessels  had  been  made  by  the  Shipping  Board  only  18  companies 
reported  the  expenses  of  operation  which  the  companies  were  re- 
quired to  meet  under  the  conditions  of  the  'Hime  form"  requisition 
charter.  The  small  number  of  repHes  received  was  probably  due 
to  the  fact  the  questionnaire  was  sent  out  at  the  time  when  the 
military  efforts  of  the  country  were  at  the  maximum  and  when  all 
shipping  companies  were  doing  their  utmost  to  keep  their  vessels 
moving.  While  the  questionnaire  was  still  before  the  majority  of  the 
companies  the  armistice  was  signed  and  the  companies  doubtless  as- 
sumed that  the  information  requested  was  no  longer  earnestly 
desired. 

The  reports  received  from  the  18  companies  that  responded  to  the 
request  for  operating  expenses  gave  data  regarding  only  61  vessels. 
The  number  and  types  of  vessels  concerning  which  expense  accoimts 
were  received  were  too  few  to  indicate  the  average  expenses  incurred 
in  operating  under  the  ' '  time  form  "  charter.  The  data  were  not  suffi- 
cient to  be  helpful  in  ascertaining  what  revenues  and  what  rates 
would  correspond  to  costs  of  service.  However,  the  data  received 
from  the  companies  operating  vessels  for  the  Shipping  Board  were 
sufficient  to  be  of  some  service  in  working  out  the  schedule  of  requisi- 
tion rates  which  the  board  was  recommended  to  adopt,  but  which,  for 
reasons  stated  in  Chapter  11,  have  not  been  put  into  force. 

Soon  after  the  armistice  was  signed,  frequent  changes  in  rates 
were  made,  and  since  the  beginning  of  January,  1919,  several  large 
reductions  have  been  made  in  the  rates.  It  has  been  evident  since 
November,  1918,  that  analyses  of  the  costs  of  freight  services  during 
the  period  of  active  warfare  would  not  be  useful  to  the  Shipping 
Board  in  fixing  ocean  rates  to  be  charged  in  the  future.  It  will, 
however,  be  advisable  for  the  Shipping  Board  officials  who  fix  the 
rates  charged  for  the  services  of  vessels  owned  and  operated  by  the 
Government  to  ascertain  as  nearly  as  may  be  the  basic  costs  of 
service  in  the  several  ocean  trades  in  order  that  rates  may  be  made 
sufficient,  at  least,  to  cover  costs  and  in  order  that  the  Shipping 
Board  may  know  to  what  extent  it  is  making  rates  that  will  yield  a 
profit  to  the  Government.  The  comptroller's  office  is  now  in  a  posi- 
tion to  make  the  analyses  necessary  for  the  determination  of  basic 
costs  of  service  in  the  different  trades  for  the  principal  types  of  carriers. 


The  difficulty  of  fixing  freight  rates  that  correspond  with  costs — 
after  the  expenses  or  costs  of  service  for  vessels  of  different  types 
have  been  ascertained  with  a  fair  degree  of  accuracy  for  the  various 
trades — is  not  especially  great  when  the  rates  apply  to  a  full  cargo 
consisting  of  one  to  three  or  four  commodities  offered  and  carried  in 
known  and  definite  quantities  or  tonnages.  The  complications  of 
rate  making,  however,  are  intricate  when  different  rates  are  to  be 
made  for  each  of  numerous  commodities,  and  are  to  apply  to  any 
quantity  that  may  be  offered.  The  relative  costs  of  service  for  trans- 
porting different  articles  of  different  weights,  densities,  perishability, 
strength,  and  fragility,  value,  etc.,  are  hardly  determinable  with  close 
accuracy.  This  is  the  well-known  problem  of  making  freight  rates — 
rail  or  ocean — according  to  the  costs  of  service  when  it  is  impossible 
to  allocate  total  costs  with  close  accuracy  among  a  large  number  of 
dissimilar  services  simultaneously  performed.  There  are  definite 
limitations  to  the  practical  application  of  the  cost  theory  or  method 
of  making  freight  rates,  although  it  is  possible  to  allocate  with  ap- 
proximate accuracy  the  aggregate  costs  among  the  several  services 
rendered  and  to  base  rates  upon  estimated  costs.  Appendix  VI  of 
this  report  contains  some  ''Notes  upon  making  ocean  rates  based  on 
costs." 

How  far  the  costs  of  services,  when  determinable,  should  be  con- 
trolling in  making  ocean-freight  rates  is  a  question  the  answer  to 
which  will  depend  upon  the  pohcy  of  rate  making  or  rate  regulation 
that  may  be  adopted.  In  most  instances  other  facts  should  be  con- 
sidered along  with  costs  in  deciding  what  freight  charges  shall  be 
imposed  or  permitted,  but  it  will  seldom  happen  that  rates  yielding 
less  than  costs  are  justifiable.  In  all  cases,  those  responsible  for 
making  or  approving  ocean  rates  will  prefer  to  act  with  a  knowledge 
of  the  fixed  and  current  expenses  to  be  met  from  the  revenues  secured 
from  the  rates  in  question.  The  policy  of  rate  control  and  regulation 
and  the  principles  that  should  be  controlling  are  considered  in  later 
chapters. 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


83 


CHAPTER  VI. 
EATE  MAKING  AND  RATE  CONTROL  BY  THE  SHIPPING  BOARD. 

As  long  as  the  Shipping  Board  is  the  owner  and  operator  of  vessels, 
H  must  fix  rates  for  the  services  rendered.  During  the  period  of  the 
war,  and  doubtless  for  a  time  after  peace  is  restored,  the  board  will 
also  have  the  problem  of  determining  the  charges  that  may  be  made 
by  vessels  controlled,  but  not  owned,  by  the  Government.  Rate 
control,  exercised  because  of  the  scarcity  of  tonnage  and  the  increased 
trafiic  created  by  the  war,  will  merge  into  rate  regulation  as  normal 
conditions  are  gradually  restored.  The  initiation  and  making  of 
ocean  rates  will  continue  certainly  while  the  board  operates  vessels, 
and  probably  as  long  as  the  board  owns  them. 

In  making  rates  for  the  freight  services  performed  by  Shipping 
Board  vessels,  consideration  must  needs  be  given  to  the  obligations 
of  the  board  to  serve  other  departments  of  the  Government,  to  be  of 
assistance  in  building  up  a  larger  and  more  prosperous  American 
merchant  marine,  and  to  employ  business  methods  in  managing  the 
Government's  fleet,  in  so  far  as  that  can  be  done  without  interfering 
with  the  accomplishment  of  public  aims. 

When  the  Shipping  Board  provides  vessels,  or  performs  freight 
services,  for  the  Army  or  Navy  or  other  departments  of  the  Govern- 
ment, costs,  so  far  as  ascertainable,  should  be  the  basis  and  measiu'e 
of  the  charges.  The  board  can  have  no  reason  for  making  profits 
from  such  services.  As  between  different  parts  of  the  Government, 
•charges  are  a  matter  of  interdepartmental  accounting.  Payments 
Are  from  one  Government  pocket  to  another. 

It  being  the  purpose  of  the  Shipping  Board  to  promote  the  develop- 
ment of  the  American  merchant  marine,  the  board  will  not  desire  to 
make  rates  for  Shipping  Board  vessels  that  may  prevent  private 
owners,  who  may  wish  to  compete  with  Government-owned  vessels, 
from  making  reasonably  profitable  charges  for  their  service.  The 
owners  of  American  vessels  must  compete  in  the  world's  trade  with 
vessels  imder  foreign  flags,  and  successful  competition  will  not  be 
•easy  even  if  conditions  are  made  as  favorable  as  it  is  practicable  to 
make  them.  The  Government's  participation  in  the  ocean-carrying 
trade  ought  to  help,  rather  than  handicap,  private  shipping  under 
the  American  flag;  otherwise,  the  Government  will  defeat  the  primary 
purpose  it  seeks  to  accomplish  by  operating  vessels. 

Strict  adherence  to  the  methods  followed  in  commercial  enter- 
prises conducted  for  profit  is  neither  possible  nor  altogether  desirable 

32 


in  managuig  vessels  operated  by  the  Shipping  Board.  The  securing 
of  business  profits  must  be  subordinated  to  the  accomplishment  of 
public  aims — to  serving  other  departments  of  the  Government  at 
rates  that  equal  or  approximate  the  costs  of  service,  to  fostering  the 
growth  and  increasing  the  competitive  strength  of  the  American 
marine. 

In  so  far  as  the  conditions  of  international  competition  will  permit, 
the  rates  on  commercial  freight  carried  in  vessels  owned  and  operated 
by  the  Shipping  Board,  or  controlled  by  the  board  under  requisition 
or  charter  and  operated  for  its  account,  should  yield  the  Government 
ciu'rent  business  profits,  except  when  it  is  clearly  evident  that  a  re- 
duction of  the  rates  to  a  cost  basis  will  further  the  general  public 
interest. 

Shipping  Board  vessels  ^vill  necessarily  compete  with  privately 
owned  vessels.  Where  shippers  are  able  to  choose  between  Govern- 
ment vessels  and  private  vessels,  the  rates  fixed  by  the  Government 
will  determine  those  that  may  be  charged  by  private  companies.  If 
the  Government  foregoes  profits,  other  carriers  must  do  likewise. 
Moreover,  the  ocean  rates  fixed  by  the  Government  for  the  services 
performed  by  its  vessels  will  establish  a  general  standard  or  level  to 
which  shippers  will  expect  all  ocean  carriers  to  conform — those  that 
do  not,  as  well  as  those  that  do,  compete  directly  with  the  vessels  or 
lines  operated  by  or  for  the  Government.  The  rates  for  all  vessels, 
Government  and  private,  should  be  reasonable,  but  the  Government 
should  do  nothing  to  limit  the  development  of  private  shipping. 

Until  peace  has  been  established  by  treaty,  and  while  the  great 
scarcity  of  ocean  shipping  created  by  the  war  is  gradually  being  over- 
come and  normal  tonnage  conditions  are  being  restored,  the  Shipping 
Board  must  concern  itself  with  rate  control  as  well  as  rate  making. 
The  necessity  for  rate  control  was  created  by  the  war,  and  it  will  last 
while  war  conditions  prevail,  the  need  for  control  (as  contrasted  with 
regulation),  diminishing  as  the  situation,  due  to  the  war,  gives  way 
to  normal  peace-time  conditions  of  ample  tonnage  and  of  active 
general  competition  among  ocean  carriers. 

The  war-time  rate  control  exercised  by  the  Division  of  Opera- 
tions and  the  Chartering  Conunittee  of  the  Shipping  Board  was 
begun  in  1917  as  a  part  of  the  measures  taken  to  meet  a  war  crisis. 
It  was  a  military  necessity  for  the  United  States  and  the  Allies  to 
control  shipping,  both  tonnage  and  rates.  The  act  of  July  18,  1918, 
gave  the  President  statutory  authority  for  the  control  which,  as  a 
war  measure,  was  being  exercised,  and  also  gave  the  President  con- 
trol over  ocean  terminal  facilities,  services,  and  charges.  By  procla- 
mation issued  July  21,  1918,  the  President  conferred  upon  the  Ship- 
ping Board  the  power  to  control  ocean  rates.  The  authority  over 
terminal  facilities,  services,  and  charges  was  vested  in  the  Shipping 
118231—19 3 


84 


OCEAN  BATES  AND  TERMINAL  CHABGBS. 


Board  by  an  Executive  order  dated  December  3,  1918.  The  powers 
granted  by  the  act  of  July  18,  1918,  will  "cease  upon  the  proclama- 
tion of  the  final  treaty  of  peace"  imless,  *'in  the  judgment  of  the 
President,  the  tonnage  shortage  at  such  time  is  so  severe  that  national 
interests  of  the  United  States  are  jeopardized,"  in  which  case,  he 
may  extend  the  act  for  a  period  of  not  exceeding  nine  months. 

The  shortage  of  tonnage  in  American  conmierce  will  still  be  so 
great  when  peace  is  proclaimed  that  it  will  probably  be  considered 
advisable  to  extend  the  life  of  the  act  of  July  18, 1918,  for  the  possible 
period  of  nine  months  in  order  that  the  Shipping  Board  may  continue 
to  exercise  the  control  necessary  to  prevent  extortionate  ocean 
freight  and  terminal  charges,  to  keep  discriminations  among  shippers 
and  between  ports  within  reasonable  bounds,  and,  in  general,  so  to 
stabilize  ocean  rates  and  terminal  charges  as  to  enable  manufacturers 
and  traders  to  engage  in  foreign  commerce  and  to  make  plans  for 
the  future  with  the  assurance  that  ocean  rates  will  be  kept  within 
limits  that  make  profitable  business  possible. 

Freight  forwarders  and  steamship  operators,  especially  those 
connected  with  regular  steamship  lines,  have  emphasized  the  neces- 
sity of  stabilizing  ocean  rates  during  times  such  as  now  prevail, 
when  competition  among  ocean  carriers  is  absent  or  only  partial. 
When  shippers  may  be  required  to  pay  widely  varying  rates  for  simi- 
lar services,  no  exporter  can  be  certain  whether  the  rates  he  pays 
are  similar  to  those  charged  his  competitors.  In  the  absence  of 
Government  control  of  ocean  rates,  it  is  impossible  to  make  contracts 
for  the  sale  or  purchase  of  goods  with  a  knowledge  of  what  the 
ocean  charges  will  be.  Without  doubt,  there  will  be  such  a  shortage 
in  ocean  tonnage  throughout  the  year  1919  as  to  make  desirable  the 
stabilization  of  ocean  rates  through  Government  control.  What  is 
true  of  ocean-freight  rates  applies  in  greater  or  less  degree  to  terminal 
charges. 

For  the  reasons  here  briefly  outlined,  it  is  recommended  that  the 
Shipping  Board  continue  its  control  over  rates  until  the  serious 
shortage  in  tonnage,  due  to  the  war,  has  been  overcome.  Then 
control  shoidd  merge  into  regulation,  as  provided  for  by  the  act  of 
September  7,  1918,  or  by  such  legislation  as  may  be  enacted  to  sup- 
plement that  law.  It  would  not  be  desirable  for  rate  control  to  be 
followed  by  an  inactive  policy  on  the  part  of  the  Government  of 
complete  noninterference  with  ocean  rates  and  terminal  charges. 

The  problems  of  rate  regulation  are  considered  in  the  following 
chapter. 


CHAPTER   VIL 
RATE  REGULATION  BY  THE  SHIPPING  BOARD. 

The  enforcement  of  the  provisions  of  the  United  States  Shipping 
act  of  September  7,  1916,  which  provide  for  the  regulation  of  the 
services  and  rates  of  carriers  subject  to  the  act,  concerns  carriers, 
shippers,  and  the  public.  Regulation  wiU  affect  the  income  of  the 
carriers,  the  development  of  the  merchant  marine,  and  the  condi- 
tions under  which  foreign  and  interstate  commerce  may  be  carried 
on.  The  public  as  a  whole  has  an  interest  in  the  policy  and  practice 
that  may  be  followed  in  regulating  ocean  shipping. 

The  act  of  1916  applies  to  common  carriers  by  water  rmining  on 
regular  routes  in  the  foreign  and  interstate  commerce  of  the  United 
States.  Some  of  the  provisions  of  the  law  apply  to  common  carriers 
by  water  and  to  ** other  persons  subject  to  this  act,"  and  the  statute 
defines  ''other  persons  subject  to  this  act"  as  ''any  person  not 
included  in  the  term  'common  carrier  by  water'  carrying  on  the 
business  of  forwarding,  or  furnishing  wharfage,  dock,  warehouse,  or 
other  terminal  facilities  in  connection  with  a  common  carrier  by 
water."  It  is  provided  "that  a  cargo  boat,  commonly  called  an 
'ocean  tramp/  shall  not  be  deemed"  a  "common  carrier  by  water 
in  foreign  commerce." 

The  statute  (sec.  16)  makes  it  milawful  for  any  common  carrier 
by  water,  or  other  person  subject  to  the  act,  to  give  any  unreasonable 
preference  or  advantage  to  any  particular  person,  locality,  or  descrip- 
tion of  traffic ;  to  allow  any  person  to  obtain  transportation  services 
for  less  than  the  regular  rates  by  means  of  false  billing,  classification, 
or  weight  of  traffic;  and  to  persuade  any  company  not  to  give  a 
competing  carrier  by  water  as  favorable  rates  of  insurance  as  are 
granted  to  a  carrier  or  other  person  subject  to  the  act.  The  prohibi- 
tions in  section  16  run  against  all  carriers  subject  to  the  act.  Section  17 
prohibits  common  carriers  by  water  in  foreign  commerce  from  making 
unjust  discriminations  between  shippers  or  ports.  When  the  Shipping 
Board  finds  that  such  unjust  discriminations  are  being  practiced, 
the  board  may  make  an  order  requiring  the  carrier  or  carriers  to 
"discontinue  demanding,  charging,  or  collecting  any  unjustly  dis- 
criminatory or  prejudicial  rate,  fare,  or  charge."  Section  18  applies 
to  common  carriers  by  water  in  the  interstate  commerce  of  the 
United  States,  and  requires  such  carriers  to  establish  reasonable 
charges,  classifications,  and  regulations,  and  to  file  their  maximum 
charges  with  the  Shipping  Board.  The  rates  thus  filed  may  not  be 
increased  "except  with  the  approvid  of  the  board,  and  after  10  days' 
public  notice."  When  the  board  finds  any  charge,  classification,  or 
regulation  to  be  unjust  or  unreasonable,  "it  may  determine,  prescribe, 
and  order  enforced  a  just  and  reasonable  maximum  rate,  fare,  or 

36 


36 


OCEAN   RATES  AND  TERMINAL  CHARGES. 


charge,  or  just  and  reasonable  classification,  tariff,  regulation,  or 
practice."  Section  19  provides  that  when  a  carrier  reduces  its  rates 
below  "a  fair  and  remunerative  basis  with  the  intent  of  driving  out 
and  otherwise  injuring  a  competitive  carrier  by  water,  it  shall  not 
increase  such  rates  unless,  after  hearing,  the  board  finds  that  such 
proposed  increase  rests  upon  changed  conchtions  other  than  the 
elimination  of  said  competition.  ' 

In  general,  the  shipping  act  applies  to  regular-line  carriers  m  the 
interstate  and  foreign  commerce  of  the  United  States,  prohibits  all 
such  carriers  from  making  unreasonable  discriminations  as  between 
persons  and  ports,  and  requires  regular  lines  engaged  in  the  interstate 
commerce  of  the  United  States  to  charge  reasonable  rates  and  file 
them  with  the  Shipping  Board.  The  board  is  given  power  to  deter- 
mme  the  reasonabk^ness  of  the  charges  and  practices  of  interstate 
carriers,  and  to  prescribe  maximum  rates. 

The  law  states  what  carriers  by  water  must  do,  and  what  the 
Shipping  Board  may  do.  The  fact,  however,  that  the  board  is  per- 
mitted rather  than  recjuired  to  exercise  its  authority  does  not  in  any 
way  affect  the  obligations  of  the  board  to  enforce  the  principles  and 
provisions  of  the  act.  The  Shipping  Board  exists  primarily  to  inter- 
pret, administer,  and  enforce  the  act  of  September  7,  1016;  and,  with 
the  restoration  of  peace  and  the  return  of  normal  conditions  of  ocean 
shipping,  the  sections  of  the  shipping  act  having  to  do  with  rate  and 
service  regulation,  rather  than  the  sections  concerning  the  construction 
and  operation  of  vessels,  will  chiefly  concern  the  Shipping  Board. 

Is  the  regulation  of  the  services  and  charges  of  ocean  carriers  and 
terminal  agencies  wise  and  desirable?  This  question  may  be  said 
to  have  been  answered  affirmatively,  as  regards  ocean-line  carriers 
engaged  in  intei-state  commerce,  when  Congress  passed  the  shipping 
act.  The  answer  is  less  definite  regarding  carriers  in  foreign  com- 
merce and  the  agencies  that  perform  terminal  services,  but  even  in 
their  case  the  law  prohibits  unreasonable  and  imfair  discriminations, 
and  when  the  Shipping  Board  finds  that  a  carrier  by  water  in  foreign 
commerce  has  made  rates  that  are  '*  unjustly  discriminatory  between 
shippei-s  or  ports,"  the  board  ''may  alter  the  same  to  the  extent 
necessary  to  correct  such  unjust  discrimination  or  prejudice."  The 
act  also  requires  those  rendering  terminal  services  in  connection  with 
a  common  carrier  by  water  subject  to  the  act  "  to  observe  and  enforce 
just  and  reasonable  regulations  and  practices;"  and  if  the  board 
finds  this  is  not  being  done,  it  may  prescribe  ''a  just  and  reasonable 
regulation  or  practice."  The  board  does  not  have  the  authority  to 
fix  the  charges  for  terminal  services,  but  it  has  other  regulatory 
powers  over  such  charges. 

It  was  clearly  the  intention  of  Congress  that  carriers  by  water 
engaged  ''  on  regular  routes  "  in  the  interstate  commerce  of  the  United 
States  and,  to  a  less  degree,  such  carriers  employed  in  transporting 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


37 


the  foreign  conmierce  of  the  United  States  should  be  regulated;  but 
shortly  after  the  Shipping  Board  was  organized  the  United  States 
was  drawTi  into  the  World  War,  and  for  regulation  by  the  board  was 
temporarily  substituted  practically  complete  Government  control  of 
American  shipping  and  the  construction  and  operation  of  vessels  by 
the  Emergency  Fleet  Corporation.  Consequently,  the  experiment  of 
Government  regulation  of  ocean  carriers  has  not  yet  been  tried  out. 

Many  persons  engaged  in  the  ocean-shipping  business  question  both 
the  desirability  and  the  possibility  of  giving  effect  to  the  regulatory 
principles  and  provisions  of  the  shipping  act  of  September  7,  1916. 
In  support  of  this  view,  it  is  argued  that  ocean  transportation  is  a 
highly  competitive  business;  that  the  traffic  created  by  foreign  com- 
merce is  sought  by  shipping  of  all  flags;  and  that  the  resulting  com- 
petition is  world-wide,  all  pervasive,  and  quite  beyond  the  control  or 
effective  limitation  of  carriers  or  of  Government.  It  is  also  con- 
tended that,  even  though  the  United  States  Government  has  the 
power  under  the  Constitution  and  as  a  sovereign  State  to  regulate 
commerce  with  foreign  nations,  the  effective  exercise  of  that  power 
is  limited  not  only  by  the  sovereign  rights  of  other  nations  to  regulate 
their  commerce  with  the  United  States,  but  also  by  the  fact  that 
owners  of  ships  will  be  disposed  to  employ  their  vessels  in  the  trade 
of  those  countries  that  impose  the  fewest  regulations  and  the  lightest 
burdens  upon  shipping.  If  any  particular  country  seeks  to  regulate 
shipping  while  the  other  principal  maritime  nations  do  not,  that 
country  may  prevent  the  development  of  its  merchant  marine. 

Experience  in  applying  the  shipping  act  will  best  determine  how 
far  it  is  practicable  or  wise  to  go  in  regulating  the  services  and  charges 
of  ocean  carriers  and  the  terminal  companies  by  which  they  are 
served.  The  problem  of  enforcing  the  act  is  one  of  making  a  prac- 
tical application  of  sound  principles.  The  law  aims  to  keep  the 
discriminations  of  ocean  carriers  within  reasonable  limits,  and  that 
would  be  in  the  interest  of  producers  and  merchants  who  trade  with 
regions  reached  by  water  routes;  it  would  also  benefit  American  com- 
merce to  keep  one  port  from  being  given  imf air  preference  over  other 
ports;  and  the  carriers  themselves  would  be  the  gainers  if  their  com- 
petition were  made  open  and  fair  instead  of  secret  and  destructive. 

For  many  years  there  was  opposition  to  the  interstate  commerce 
law,  the  purpose  of  which  has  been  to  make  the  charges  for  railroad 
services  public  instead  of  secret,  fair  and  just  instead  of  willfully 
discriminatory,  as  among  persons,  places,  and  commodities,  and 
stable  instead  of  fluctuating  with  every  change  in  the  force  or  cii- 
cumstances  of  competition.  At  present,  however,  everyone  recognizes 
that  railroad  charges  should  be  pubHc  and  stable  as  well  as  absolutely 
and  relatively  reasonable. 

The  fact  that  the  services  and  charges  of  ocean  carriers  are  of  a 
public  nature  will  hardly  find  general  acceptance  in  a  day,  and  it  will 


88 


OCEAN   RATES  AND  TERMINAL   CHARGES. 


OCEAN  RATES  AJSTD  TEBMDSf AL  CHARGES. 


39 


hi 


doubtless  require  time  to  convince  everybody  that  carriers  by  watci- 
as  well  as  by  rail  ought  to  conduct  their  business  openly  and  in  accord- 
ance with  standards  fixed  by  the  Government.  It  was  nearly  20 
years  after  the  interstate  commerce  act  of  1887  was  enacted  before 
its  underlying  principles  were  accepted  without  question,  and  the 
law,  reinforced  by  the  Elkins  Act  of  1903  and  the  Hepburn  Act  of 
1906,  was  made  really  effective.  It  ought  not  to  take  20  years  to 
solve  the  problem  of  regulating  carriers  by  water.  The  experience 
had  in  regulating  the  railroads  will  be  helpful,  but  it  is  not  to  be 
supposed  that  it  will  be  possible  to  eliminate  entirely  the  usual  period 
of  experimentation  and  of  refinement  of  methods  and  machinery  of 
administration. 

That  the  regulation  even  of  line  carriers  by  water — the  present  law 
does  not  apply  to  vessels  employed  in  irregular,  i.  e.,  tramp,  services — 
presents  real  difhculties  must  be  fr  inkly  admitted ;  but  the  provisions 
of  the  shipping  act  allowing  carriers  by  wat^r  to  form  conferences 
and  to  enter  into  agreements  as  to  their  services  and  charges,  which 
agreements  are  subject  to  the  approval,  modification,  or  cancellation 
of  the  Shipping  Board,  seem  to  make  the  regulation  of  line  services 
and  rates  possible  and  ])racticable. 

At  the  time  the  bill  which  became  the  shipping  act  was  under 
consideration,  a  careful  investigation  was  made  of  ocean  conferences 
and  shipping  agreements,  ^and  it  was  decided  so  to  amend  the  Sherman 
Antitrust  Act  as  to  permit  shipping  companies  to  enter  into  confer- 
ence agreements.  The  shipping  law,  as  enacted,  prohibits  deferred 
rebates,  the  operation  of  "fighting"  ships,  and  other  unfair  practices, 
and  then  permits  the  earners  to  enter  into  conference  agreements  in 
accordance  with  previous  practice.  As  is  well  known,  those  agree- 
ments cover  rates  and  fares,  the  apportionment  of  earnings  and 
traffic,  the  regulation  of  sailings,  the  distribution  of  tonnage  among 
ports,  and  other  matters  of  common  interest  to  competing  carriers. 

Wlien  several  carriers,  whether  railroad  or  steamship  lines,  connect 
the  same  points  and  compete  for  traffic  free  to  move  by  any  one  of 
the  several  lines,  it  is  necessary  to  the  carriers  and  desirable  for  the 
public  that  there  should  be  associated  action  in  arranging  services 
and  making  rates.  Unless  there  is  a  common  understanding  among 
the  rivals,  there  will  be  discriminations  in  rates  injurious  alike  to 
carrier  and  shipper.  Experience  shows  that  competition  unregulated 
by  railway  or  steamship  associations  tends  to  become  destructive. 
Kate  wars  among  railroads  and  among  ocean  lines  were  the  natural 
consequence  of  imregulated  competition. 

The  principal  lines  operating  in  each  of  the  trades  from  and  to 
the  Atlantic,  Gulf,  and  Pacific  ports  of  the  United  States  are  mem- 
bers of  one  or  more  conferences.  Through  its  power  to  approve, 
modify,  or  cancel  these  agreements,  the  Shipping  Board  possesses 
the  power  to  regulate  ocean  line  carriers  as  regards  their  practices, 


services,  and  charges.  Moreover,  it  is  a  power  which  the  board  not 
only  may  employ,  but  will  be  obliged  to  exercise,  if  it  formally  ap- 
proves, modifies,  or  cancels  the  agreements  which  the  associations 
of  ocean  carriers  are  required  to  file. 

The  regulation  of  steamship  lines,  through  its  control  over  the 
provisions  of  the  conference  agreements,  will  enable  the  Shipping 
Board  not  only  to  regulate  the  services,  charges,  and  practices  of 
the  lines  engaged  in  interstate  commerce,  but  also  to  supervise  and, 
in  large  measure,  to  regulate  the  lines  operated  in  the  foreign  trade 
of  the  United  States.  The  ocean  lines  engaged  in  the  foreign  trade 
will  have  reason  for  welcoming  Government  regulation  through 
formal  approval  of  the  conference  agreements.  It  will  be  easier  for 
the  carriers  to  enforce  their  agreements  because  of  the  fact  that  the 
agreements  must  be  filed  with  the  Shipping  Board  and  "shall  be 
lawful  only  when  and  as  long  as  approved  by  the  board."  The 
conferences  are  formed  to  enable  the  carriers  to  make  enforceable 
agreements  stabilizing  rates  and  regulating  services  and  practices. 
The  line  carriers  especially  desire  to  maintain  stable  rates;  and,  if 
the  rates  are  reasonable,  the  shipper  benefits  from  the  stabilization. 
The  Shipping  Board  can  aid  the  conferences  to  accomplish  their 
legitimate  purpose,  and  in  so  doing  the  board  can  exercise  in  a 
practical  way  a  large  measure  of  control  over  the  carriers  subject 
to  the  shipping  act. 

The  extent  to  which  it  is  desirable  to  go  in  the  regulation  of 
terminal  facilities  and  charges  is  indicated  by  the  facts  presented  in 
Chapter  IV  of  this  report.  Here,  as  in  the  regulation  of  ocean  rates, 
the  Federal  Government  enters  upon  a  new  field,  and  its  course  must 
be  guided  by  experience.  Whatever  regulation  is  undertaken  by  the 
Federal  Government  must  be  exercised  by  cooperation  with  State 
and  mimicipal  authorities  and  with  the  Interstate  Commerce  Com- 
mission or  other  Federal  agency  having  jurisdiction  over  railroads. 

In  the  regulation  of  ocean  rates  and  terminal  charges,  the  Ship- 
ping Board  has  a  permanent  task.  There  will  be  opposition  to  all 
regulation,  which,  however,  may  be  expected  to  lessen  and  eventually 
to  end  as  the  problems  of  regulation  are  successfully  solved.  Twenty 
years  ago  the  future  of  railroad  regulation  seemed  doubtful;  to-day 
the  only  question  is  how  far  shall  Government  regulation  or  control 
be  extended.  It  may  not,  probably  will  not,  be  necessary  ever  to 
regulate  ocean  carriers  as  completely  as  carriers  by  rail;  but  the 
fundamental  relations  or  obligations  to  the  public  being  the  same  for 
carriers  by  vvater  as  for  carriers  by  rail,  the  Shipping  Board  will  seek 
to  give  practical  and  helpful  effect  to  the  same  principles  that  have 
been  followed  in  working  out  the  regulation  of  railroads. 

Success  in  regulation  will  depend  largely  upon  the  organization 
developed  for  the  task.  A  suggested  plan  of  organization  is  outlined 
in  the  following  chapter. 


jh 


i^': 


CHAPTER  VIII. 

ORGANIZATION   FOR  REGULATION   OF   OCEAN   RATES  AND 

TERMINAL  CHARGES. 

.   The  Shipping  Board  has  three  duties  as  regards  ocean  rates  and 
terminal  charges: 

1.  Until  peace  has  been  brought  about  and  fairly  normal  condi- 
tions of  ocean  transportation  have  been  restored,  the  Shipping  Board 
will  need  to  continue  its  war-time  control  of  such  charter  and  other 
ocean  rates  as  are  now  being  fixed  by  the  board.  It  will  doubtless 
be  possible  and  desirable  for  the  board  to  reduce  the  degree  and 
extent  of  its  control  over  those  rates  as  the  effects  of  the  war  are 
outgrown. 

2.  The  making  of  rates  for  the  services  performed  by  vessels 
operated  by  the  Emergency  Fleet  Corporation  of  the  Shipping 
Board.  In  all  probability,  the  board  will  continue  for  some  time 
after  the  proclamation  of  peace  to  operate  some  if  not  all  of  the 
vessels  it  owns.  Moreover,  when  the  board  charters  its  vessels 
to  companies  or  individuals  to  operate,  it  will  doubtless  not  only 
determine  the  rates  at  which  the  vessels  are  chartered  but  will 
also  prescribe  the  maximum  rates  that  may  be  imposed  by  the 
charterers. 

3.  The  permanent  regulation  of  the  rates  and  services  of  ocean 
carriers  in  so  far  as  that  regulation  is  required  by  the  provisions  of 
the  shipping  act  of  September  7,  1916.  Should  the  provisions  of 
this  initial  act  for  the  regulation  of  the  shipping  business  not  be 
increased  and  strengthened  by  subsequent  legislation,  the  Shipping 
Board  will,  after  it  ceases  to  exercise  its  present  war-time  control 
over  shipping,  have  increasingly  important  functions  to  perform  in 
the  regulation  of  ocean  carriers. 

The  present  war-time  control  of  charter  and  other  rates  was  exer- 
cised by  the  Board's  Division  of  Operations  and  the  Chartering 
Committee.  It  is  assumed  that  the  Division  of  Operations  and  the 
officials  who  operate  the  vessels  owned  by  the  board  will  work  out 
the  charges  for  the  freight  services  performed  hy  such  vessels. 

With  a  view  to  obtaining  a  clear  conception  of  the  task  of  making 
and  controlling  rateSj  conferences  have  been  had  with  the  Director 
and  Assistant  Directors  of  the  Division  of  Operations,  and  others. 
All  agreed  that  a  definite  organization  should  be  created  within  the 
Division  of  Operations,  the  organization  to  be  such  that  the  detailed 
work  of  rate  making  may  be  performed  in  a  prompt  ^nd  practical 
manner,  and  in  such  a  way  as  to  relieve  the  Director  of  Operations 
of  the  consideration  of  aU  questions  except  those  of  general  policy. 

40 


OCEAX  RATES  AND  TERMINAL  CHARGES. 


41 


Of  the  plans  of  organization  that  have  been  suggested,  the  one 
by  Mr.  A.  E.  Clegg,  formerly  associated  with  the  work  of  the  Ship- 
ping Control  Committee,  and  Assistant  Director  of  Operations,  seems 
especially  practicable  and  commendable.  It  is  recommended  that 
Mr.  Clegg's  plan  be  adopted  and  tried  out  in  practice.  iMr.  Clegg's 
statement  of  his  plan  is  as  follows: 

It  is  my  opinion  that  machinery  must  be  established  which  >\ill  enable  the  Ship- 
ping Board  to  work  as  quickly  and  efficiently  and  with  as  full  a  knowledge  of  the 
world  rate  market  as  would  a  private  company  operating  in  the  steamship  business 
for  its  own  account.  In  order  to  do  this,  it  will  be  necessary  to  have  the  main  rate 
organization  at  New  York,  for  it  is  at  New  York  that  the  reports  from  all  over  the 
world  to  steamship  companies,  importers,  exporters,  brokers,  etc.,  are  made  avail- 
able each  day. 

I  have  a  very  simple  plan  in  mind  which  I  believe  covers  the  necessities  of  the 
situation — ^a  plan  which  would  enable  Washington  to  have  its  hands  fully  on  world 
trade,  rates  and  conditions  and  have  the  voice  of  authority  in  the  establishing  or  chang-" 
ing  of  rates. 

No.  1.  In  Washington  should  be  situated  an  executive  to  handle  rate  matters 
only,  in  whose  hands  should  be  the  power  to,  without  delay,  approve  or  disapprove 
rates.  This  executive  should  receive  reports  daily  from  New  York  as  a  center  for 
the  Atlantic  district.  New  Orleans  for  the  Gulf  district,  and  San  Francisco  for  the 
Pacific  coast.  (San  Francisco  would  report  by  wire,  if  necessary.)  These  reports 
(more  fully  outlined  in  a  later  paragraph)  would  give  the  executive  a  complete  re\iew 
of  any  changes  in  rates  in  all  trades— rates  quoted  outward  or  homeward  by  British, 
Japanese,  or  other  flag  steamers;  rates  which  the  American  exporter  or  importer 
needs  in  order  to  do  special  lines  of  business,  or  continue  old  lines;  information  con- 
cerning large  contracts  which  are  in  the  market  for  supplying  and  shipping,  and  for 
the  manufactiuing  of  which  England,  Germany,  or  other  countries  are  in  competition 
with  this  country;  information  as  to  rates  being  quoted  from  England  or  other  coun- 
tries to  world  points  as  against  rates  to  the  same  world  points  in  effect  from  United 
States  ports,  etc.— and  would  give  him  such  a  complete  world  picture  that, 
after  taking  into  consideration  any  particular  policy  of  the  Shipping  Board,  would 
make  it  a  simple  matter  for  him  to  act  quickly  and  give  permission  for  a  rate  to  be 
established  either  for  a  period  or  for  an  indi\ddual  parcel  of  cargo,  as  the  case  may  be. 

No.  2.  New  York  organization. — A  department  comprising  one  experienced  man, 
as  manager,  with  five  assistants,  would,  for  the  time  being,  be  all  that  would  be 
required  for  instituting  this  work.  The  manager  would  direct  these  assistants  (each 
assistant  taking  certain  trades  so  as  gradually  to  become  a  specialist  in  such  trades) 
to  spend  all  of  their  time  circulating  amongst  the  steamship  people,  brokers,  exporters, 
and  importers.  These  men  would  gather  day  by  day  all  information  connected 
with  the  foreign  markets,  and  the  information  received  by  the  steamship  people, 
brokers,  exporters,  and  importers  through  various  channels  would,  in  the  very  nature 
of  things,  be  made  available  to  such  rate  department  representatives,  as  each  inter- 
est would  be  looking  to  the  Shipping  Board  for  assistance  of  one  sort  or  another. 

Each  rate  department  representative  would  make  up  each  night  a  full  report  of  the 
information  gathered  diu-ing  the  day  for  such  trade  or  trades  as  he  was  handling,  a 
copy  of  which  would  be  delivered  to  the  manager  who  is  operating  that  trade  in  this 
office,  so  that  each  would  be  advised  of  the  rate  situation  in  the  trade  over  which  he 
has  jurisdiction.  All  reports  for  the  day  would  be  given  to  the  manager  of  the  rate 
department,  and  he  would  pick  out  the  viul  matter  and  make  up  a  central  report 
covering  all  trades,  which  he  would  dispatch  every  evening  to  the  Washington  execu- 
tive.   The  manager  would  also  keep  compiled  in  his  department  records  of  all  Ship- 


42 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


fff^fi 


ping  Board  steamerp,  separately  as  to  trades,  which  would  give  information  m  to  the 
homeward  business  in  sight  or  closed  for  each  individual  steamer,  and  the  rate  at 
which  the  operator  has  closed  or  been  given  authority  to  close.  It  must  then  be 
arranged  that  operators  of  ships  which  come  under  the  jurisdiction  of  New  York 
would,  on  hearing  from  their  agents  abroad,  communicate  with  the  manager  of  the 
rate  department  here,  who.,  after  communicating  with  the  Washington  executive  by 
telephone,  would  be  in  a  position  to  authorize  the  operator  without  delay  to  close 
up  promptly  for,  or  quote  immediately  upon,  any  prospective  business.  As  actually, 
therefore,  the  working  authority  and  the  records  would  be  maintained  in  New  York, 
there  would  be  no  danger  of  one  Shipping  Board  steamer  competing  with  another 
for  one  parcel  of  cargo,  and  the  lines  could  be  kept  very  easy  from  entangling  in  any 
way. 

No.  3.  Advisory  committee.— li  would,  to  my  mind  be  extremely  helpful  and  would 
tend  to  draw  those  interested  in  American  commerce  more  closely  together  if  an 
advisorj"  committee  on  rates  was  nominated  to  meet  the  manager  of  the  rate  depart- 
ment twice  weekly  for  the  purpose  of  discussion  and  giving  helpful  advice.  This 
committee  could  be  made  up  of  three  steamship  men  and  three  men  from  export 
and  import  houses — men  chosen  who  are  interested  in  and  acquainted  with  the  larg- 
est number  of  principal  trades.  These  exporters  and  steamship  men  will  have, 
of  course,  opposite  viewpoints,  but  this  will  be  more  helpful  than  otherwisfe,  par- 
ticularly if  an  intelligent  man  is  appointed  as  manager  of  the  department.  After 
all,  the  entire  committee  will  be  working  for  American  interests,  .and  the  "happy 
medium"  in  a  rate  situation  would  soon  be  arrived  at. 

No.  4.  New  Orleavs  organization. — I  would  recommend  that  a  similar  department 
be  organized  at  New  Orleans  to  take  care  of  the  Gulf  situation.  The  department 
there  need  only,  of  course,  be  on  a  modified  scale,  and  an  advisory  committee  need 
not  be  made  a  featm-e. 

No.  5.  Pacific  coast. — I  am  not  acquainted  with  Pacific  coast  conditions,  but  un- 

,  doubtedly  similar  information  will  be  desirable  from  the  Pacific  coast;  and  if  the 

Washington  (executive  could  receive  daily  a  report  which  gives  the  market  features 

for  the  previous  day  at  Atlantic  ports.  Gulf  ports,  and  Pacific  coast  ports,  he  would 

have  very  complete  knowledge  on  which  to  base  his  rulings. 

A  PROPOSED  ORGANIZATION  FOR  REGULATION  OP  RATES  AND  TERMINAL 

CHARGES. 

As  an  operator  of  vessels,  the  Shipping  Board  will  be  a  competitor 
of  the  companies  and  individuals  engaged  in  the  business  of  ocean 
transportation.  The  private  companies  and  individuals  who  compete 
with  the  Shipping  Board  vessels  may  and  doubtless  will  feel  that 
the  board  itself,  or  some  designated  officials  of  the  board  not  con- 
nected with  the  Division  of  Operations,  should  hear  and  determine 
questions  that  may  arise  as  to  the  absolute  and  relative  reasonableness 
of  the  charges  for  the  services  performed  by  Shipping  Board  vessels. 
It  will  be  felt  by  the  companies  and  individuals  operating  as  private 
carriers  that  the  board,  or  its  designated  officials,  should  regulate 
private  carriers  and  also  have  power  to  review  the  charges  that  have 
been  fixed  for  services  rendered  by  Government  vessels. 

Under  the  act  of  July  18,  1918,  and  the  President's  proclamation  of 
December  3  of  the  same  year — which  law  and  proclamation  will 
presumably  be  in  force  for  the  allowable  statutory  period  of  nine 


OCEAN   RATES  AND  TERMINAL   CHARGES. 


43 


months  after  the  signing  of  peace — the  Shipping  Board  has  large 
powers  and  duties  as  regards  the  services  and  charges  of  companies 
and  individuals  owning  ocean  terminals  and  performing  port  and 
terminal  services.  The  Shipping  Board's  division  or  its  officials  that 
regulate  the  rates  and  services  of  ocean  carriers  should  also  enforce 
tlie  authority  over  terminals  which  the  Shipping  Board  may  deem 
necessary  to  exercise. 

It  is  especially  important  that  the  Shipping  Board  should  develop 
an  appropriate  organization  through  which  to  function  in  the  regula- 
tion of  the  services  and  rates  of  ocean  carriers,  as  required  by  the  act 
of  September  7,  1916.  It  was  primarily  for  the  regulation  of  ocean 
carriers  engaged  in  American  commerce  and  for  the  development  of 
the  merchant  marine  of  the  United  States  that  the  Shipping  Board 
was  created.  The  fact  that  the  European  war  was  in  progress  at 
the  time  this  law  was  enacted,  and  the  possibility  that  the  United 
States  might  become  involved  in  that  war,  fortunately  caused  Con- 
gress to  include  in  the  shipping  act  provisions  authorizing  the  board 
to  construct,  own,  and  operate  vessels,  the  period  of  operation  being 
limited  to  five  years  after  the  close  of  the  European  war.  Although 
the  war  made  the  construction  and  operation  of  vessels  and  the 
control  of  all  shipping  engaged  in  American  commerce  the  first  and 
most  important  duty  of  the  Shipping  Board,  the  return  of  peace  will 
give  first  place  to  the  work  of  regulating  ocean  carriers  and  developing 
American  shipping.  It  would  be  a  mistake  for  the  board  not  to 
organize  for  the  effective  enforcement  of  the  regulatory  provisions 
of  the  shipping  act. 

On  the  nth  of  September,  1918,  while  the  war  was  still  in  progress 
and  when  there  was  no  anticipation  of  an  early  armistice,  the  following 
recommendations  concerning  the  making  and  control  of  ocean  rates 
by  the  Shipping  Board  were  submitted  to  the  Director  of  the  Division 
of  Planning  and  Statistics  for  transmission  to  the  board: 

1.  That  the  board  establish  a  1  )ivision  of  Rates  and  confer  upon  the  division  the  duty 
and  power— 

(a)  To  annoimce  or  publish  all  rates  fixed  by  authority  of  the  board. 

(b)  To  call  upon  the  Division  of  Operations  to  name  to  the  Division  of  Rates  the 
freight  and  charter  rates  that  need  to  be  established,^  the  rates  so  named  to  be  subject 
to  such  review  and  amendment  as  the  Division  of  Rates  may  deem  necessary  for 
the  enforcement  of  the  board's  rate  policies.  In  tho  future,  as  at  present,  rates  shall 
be  named  in  the  first  instance  by  the  Division  of  Operations,  either  directly  or  through 
the  Chartering  Committee. 

(c)  To  hear  complaints  of  ocean  carriers  and  of  shippers  as  to  freight  rates  and  ter- 
minal charges. 

(d)  To  recommend  requisition  rates  for  adoption  by  the  board. 

(e)  To  regulate  port  and  terminal  charges  in  so  far  as  may  be  necessary  for  the 
enforcement  of  section  12  of  the  shipping  act  of  July  18,  1918. 


>  This  phraseology  might  better  have  been:  To  obtain  from  the  Division  of  Operations  the  freight  and 
charter  rates  that  have  been  established,  etc. 


!t^ 


44 


OCEAN   RATES  AND  TERMINAL  CHARGES. 


OCEAN  RATES  AND  TERMINAL  CHARGE^. 


45 


u 


(/)  With  thf  cooperation  of  the  Law  Division,  to  enforce  established  rates  and  compel 
observance  of  orders,  rules,  and  regulations  regarding  rates. 

(g)  To  represLjnt  the  board  in  negotiations  with  foreign  Governments,  through  the 
St4ite  Department  and  otherwise,  concerning  rates. 

2.  That  the  Division  of  Rates  be  so  organized  as  to  obtain  the  judgment  upon  rate 
questions  of  three  men  of  differentiated  technical  knowledge.  This  may  be  done  by- 
providing  for  a  director  and  two  assistant  directors,  or  for  a  committee  of  three,  the 
chairman  of  the  committee  to  act  as  head  or  director  of  the  division,  and  the  two 
other  members  to  have  the  executive  duties  that  assistant  directors  would  have. 
If  the  organization  provide  for  a  director  and  two  assistant  directors,  the  three  men 
shall  sit  as  a  board  or  committee  to  hear  complaints  as  to  rates. 

The  foregoing  memorandum  recommended  the  establishment  of  a 
Division  of  Rates,  Jieaded  by  a  director  aided  by  two  assistant  direc- 
tors. Under  this  plan,  the  director  woidd  have  charge  of  the  division 
as  a  whole,  and  would  be  concerned  with  problems  of  administration 
and  questions  of  general  policy.  One  assistant  director  would  spe- 
cialize in  the  regulation  of  ocean  rates;  the  other  assistant  director 
would  be  concerned  with  the  regulation  of  terminal  services  and 
charges.  The  three  men — the  director  and  two  assistant  directors — 
would  sit  as  a  board  to  hear  complaints.  It  is  believed  that  for  the 
present,  and  for  some  time  to  come,  the  Shipping  Board  will  have  so 
many  duties  that  it  can  not  act  as  a  board  to  hear  and  determine 
complaints  as  to  rates  or  services.  It  must  provide  an  appropriate 
organization  for  the  regulation  of  carriers  under  the  shipping  act. 

When  the  organization  above  outlined  was  suggested,  in  September, 
1918,  the  schedule  of  rates  paid  by  the  Shipping  Board  for  vessels 
taken  upon  requisition  was  under  consideration,  but  requisition  rates 
hu\^e  sinco  ceased  to  be  of  importance.  For  reasons  already  stated, 
it  is  believed  that  the  functions  of  rate  regulation  should  be  exercised 
by  a  Division  of  Rates  which,  functioning  for  the  board  itself,  should 
act  as  a  semijudicial  as  well  as  an  executive  body  for  the  enforcement 
of  the  regulatory  provisions  of  the  shipping  act. 

Within  the  Division  of  Rates  there  would  be  the  office  of  a  secre- 
tary to  handle  correspondence,  keep  the  files,  and  to  prepare  and 
issue  orders.  The  secretary  would  report  to  the  director.  There 
would  also  need  to  be  a  Bureau  of  Research  to  make  such  cost  inves- 
tigations and  other  studies  as  are  needed  to  secure  the  information 
required  for  the  intelligent  consideration  of  rates  that  come  before 
the  Division  for  Review.  A  Bureau  of  Law  would  be  required  to 
enforce  the  observance  by  carriers  and  shippers  of  the  provisions  of 
the  statute  and  of  the  rates  and  orders  promulgated  by  the  Shipping 
Board.  The  chief  of  the  Bureau  of  Law  might  well  be  selected  by 
the  board  from  its  Division  of  Law.  Both  the  bureaus  of  research 
and  of  law  would  have  duties  in  connection  with  the  regulation  of 
terminal  charges  and  services. 


It  will  be  best  to  determine  by  experience  the  administrative 
organization  which  the  proposed  Division  of  Rates  \viU  need  to 
develop  in  order  to  secure  information  regarding  terminal  facilities 
and  charges  at  the  several  ports  of  the  L^nited  States,  and  to  enforce 
the  provisions  of  the  statute  and  the  rules  of  the  board  regarding 
terminal  services  and  rates.  It  is  probable  that  the  Assistant  Direc- 
tor of  the  Division  of  Rates  who  has  direct  charge  of  terminal  matters 
will  need  to  have  at  eacli  important  port  a  superintendent  whose 
duty  it  will  be  to  keep  informed  as  to  local  conditions;  to  assist  in 
enforcing  the  orders,  ndes,  and  regulations  of  the  Shipping  Board; 
and  to  meet  carriers  and  shippers  who  desire  information  as  to  the 
requirements  of  the  Shipping  Board,  or  wlio  desire  to  suggest  changes 
in  the  rules  and  regulations  of  the  board. 

It  is  especially  desirable  that  the  Shipping  Board  should  concern 
itself  ^\Tith  the  organization  of  terminal  facilities  at  all  important 
ports  of  the  United  States,  and  should  seek  to  bring  about  a  more 
economical  and  efficient  pei-formance  of  port  and  terminal  services. 
By  cooperating  mth  the  State  and  local  authorities,  and  by  a  wise 
exercise  of  the  powers  possessed  by  the  National  Government,  the 
Shipping  Board  can  render  a  great  service  to  the  carriers  and  shippers 
engaged  in  American  maritime  commerce.  The  board  wiU  here  enter 
a  new  field  of  Federal  supervision  in  which  there  is  large  opportunity 
for  constructive  service. 


OCEAN  RATES  AND  TEEMINAL   CHARGES. 


47 


CHAPTER  IX. 

SUMMARY  AND  RECOMMENDATIONS. 

The  ocean  charter  and  freight  rates  and  port  terminal  charges 
during  the  war  have  been  ascertained,  and  comparisons  have  been 
made  with  prewar  charges.  This  enables  future  action  of  the 
Shipping  Board  in  making  rates  and  in  regulating  the  charges  of 
carriers  and  terminal  companies  to  be  taken  with  a  knowledge  of 
previous  rates. 

CONTINUANCE   OF   RATE    CONTROL. 

The  Shipping  Board  will  need  to  continue  its  control  over  charter 
and  freight  rates  until  the  serious  shortage  in  shipping  tonnage  due 
to  the  war  has  been  overcome.  This  control  should  merge  into 
the  regulation  of  ocean  carriers,  as  provided  for  by  the  shipping  act 
of  September  7,  1916,  or  by  such  legislation  as  may  be  enacted  to 
supplement  that  law. 

SUPERVISION  OF  TERMINALS  AND  REGULATION  OF  TERMINAL  SERVICES 

AND   CHARGES. 

Under  the  act  of  July  18,  1918,  and  the  President's  proclamation 
of  December  3,  1918,  the  Shipping  Board  has  complete  power  to 
regulate  the  services  and  charges  of  terminal  companies  imtil  the 
treaty  of  peace  has  been  proclaimed  and  for  a  possible  period  of 
nine  months  thereafter.  By  the  shipping  act  of  September  7,  1916, 
the  board  has  permanent  authority  over  the  regulations  and  prac- 
tices of  those  "carrying  on  the  business  of  forwarding  or  furnishing 
wharfage,  dock,  warehouse,  or  other  terminal  faciHties  in  connection 
with  a  common  carrier  by  water."  The  need  for  the  exercise  of 
this  authority  is  shown  by  the  large  variations  in  charges  for  similar 
terminal  services  within  the  same  port  and  as  among  ports;  by 
the  lack  of  coordination  of  water  terminals  with  each  other  and 
with  railroad  terminals;  and  by  the  discriminations  in  services  and 
charges  now  practiced  in  the  absence  of  Government  regulation. 

As  Dr.  Ruggles  states  in  his  report  upon  terminal  charges  at 
United  States  ports — 

The  big  problems  in  all  porta  are  the  same: 

1.  Adequate  facilities  should  be  provided  to  care  for  the  volume  of  traffic  offered. 

2.  Private  interests  should  not  be  permitted  to  utilize  port  facilities  to  their  own 
advantage. 

3.  There  should  be  complete  coordination  among  rail  carriers  themselves  and 
between  rail  and  water  carriers. 

46 


The  solution  of  these  problems  can  not  be  made  by  the  Shipping 
Board  alone.  Cooperation  with  the  Interstate  Commerce  Commis- 
sion and  with  local  port  authorities  wiU  be  necessary.  The  investi- 
gation of  terminal  services  and  charges  was  made  to  prepare  for 
the  beginning  of  such  regulation  of  the  practices  of  terminal  com- 
panies by  the  Shipping  Board  as  may  be  required  to  enforce  the 
act  of  September  7,  1916,  and  such  legislation  amendatory  thereto 
as  may  be  enacted. 

REGULATION   OF   OCEAN-FREIGHT    RATES. 

By  the  shipping  act  the  board  is  given  authority  to  regulate  the 
charges  of  common  carriers  by  water  running  on  regular  routes  in 
interstate  commerce  and  is  given  authority  to  prevent  unreasonable 
discriminations  in  the  charges  and  practices  of  carriers  by  water 
running  on  regular  routes  in  the  foreign  commerce  of  the  United 
States.  While  the  act  of  July  18,  1918,  is  in  force  the  board  will 
have  complete  authority  over  the  charges  of  ocean  carriers  engaged 
in  American  commerce.  The  charges  of  coastwise  carriers  can  be 
regulated  as  completely  as  the  Shipping  Board  may  deem  advisable. 
Less  authority  can  be  exercised  over  the  charges  of  carriers  in 
foreign  commerce.  Practically  all  steamship  lines  engaged  in  the 
foreign  commerce  of  the  United  States  are  members  of  conferences. 
Through  its  power  to  approve,  modify,  or  cancel  the  agreements 
made  by  members  of  these  conferences  the  Shipping  Board  possesses 
power  to  regulate  ocean-line  carriers  as  regards  their  practices, 
services,  and  charges.  This  power  is,  moreover,  one  which  the 
board  will  be  obhged  to  exercise  if  it  formally  approves,  modifies, 
or  cancels  the  agreements  which  the  associations  of  ocean  carrienB 
are  required  by  law  to  file  with  the  Shipping  Board. 

In  the  regulation  of  ocean  rates  the  Federal  Grovernment  enters 
upon  a  new  field  and  its  course  must  be  guided  by  experience. 
There  will  be  opposition  to  all  regulation  as  there  formerly  was  to 
the  regulation  of  railroads.  It  may  not,  probably  will  not,  be 
necessary  ever  to  regulate  ocean  carriers  as  completely  as  carriers 
by  rail;  but  the  fundamental  relations  or  obligations  to  the  public 
being  the  same  for  carriers  by  water  as  for  carriers  by  rail,  the  Ship- 
ping Board  will  necessarily  seek  to  give  practical  and  helpful  effect 
to  the  same  principles  that  have  been  followed  in  working  out  the 
regulation  of  railroads. 

ORGANIZATION    FOR   MAKING   OCEAN   RATES. 

It  is  assumed  that  the  Division  of  Operations  wiD  continue  to 
fix  rates  for  Shipping  Board  vessels,  and  it  is  understood  that  an 
organization  is  being  developed  with  a  view  to  handling  the  detail 
work  of  rate  making  in  a  prompt  and  practical  manner.     It  would 


\ 


48 


OCEAN   RATES  AND  TERMINAL  CHARGES. 


seem  advisable  that  this  organization  should  provide  for  performing 
most  of  the  work  of  rate  making  at  New  York,  New  Orleans,  and 
San  Francisco,  where  the  work  could  be  done  by  those  in  constant 
touch  with  the  shippers  and  carriers.  The  executive  in  charge  of 
the  work  at  Washington  should  have  the  power,  without  delay,  to 
approve  or  disapprove  rates  proposed  by  those  in  charge  of  the 
offices  at  New  York,  New  Orleans,  and  San  Francisco. 


ORGANIZATION   FOR 


THE   REGULATION   OF 
TERMINAL  CHARGES. 


OCEAN   RATES   AND 


It  is  especially  important  that  the  Shipping  Board  should  de- 
velop an  appropriate  organization  through  which  to  function  in  the 
regulation  of  the  services  and  rates  of  ocean  carriers,  as  required  by 
the  act  of  September  7,  1916.  It  was  for  this,  primarily,  that  the 
Shipping  Board  was  created.  The  war  has  temporarily  required 
the  board  to  give  its  attention  mainly  to  the  construction  and  opera- 
tion of  vessels.  The  time  has  now  come  for  the  board  to  organize 
for  the  effective  enforcement  of  the  regulatory  provisions  of  the 
shipping  act. 

It  is  recommended  that  a  division  of  rates  be  established,  headed 
by  a  director  aided  by  two  assistant  directors.  The  director  should 
have  charge  of  the  division  as  a  whole,  and  be  concerned  with  prob- 
lems of  administration  and  questions  of  general  policy.  One  as- 
sistant director  should  specialize  in  the  regulation  of  ocean  rates, 
and  the  other  assistant  director  should  be  concerned  with  the  regu- 
lation of  terminal  services  and  charges.  The  three  men — the  di- 
rector and  two  assistant  directors — should  sit  as  a  board  to  hear 
complaints.  The  assistant  director  in  direct  charge  of  terminal 
matters  would  need  to  be  represented  at  each  important  port  by  a 
superintendent,  whose  duty  it  would  be  to  keep  informed  as  to  local 
conditions  and  to  assist  in  enforcing  the  orders,  rules,  and  regula- 
tions of  the  board. 

It  is  especially  urged  that  the  Shipping  Board  seek  to  bring  about 
a  more  economical  and  efficient  performance  of  port  and  terminal 
services.  In  this  field  of  Federal  supervision  the  board  has  a  large 
opportunity  for  helpful  services. 


APPENDICES 


TO 


REPORT  ON 
OCEAN  RATES  AND  TERMINAL  CHARGES 


118231—19 4 


49 


"iTHSSilE^ 


Appendix  I.  • 

NOVEMBEB  8,  1918. 

MEMORANDUM  ON  REQUISITION  RATES,  RECOMMENDING  A  NEW 

SCALE. 

[Memorandtun  for  Prof.  Johnson.] 

The  board,  in  announcing  the  original  requisition  scale  now  in  effect,  said,  on 
September  27,  1917: 

All  the  foregoing  rates  are  tentative.  The  board  will  carefully  examine  the  results 
of  operation  under  the  requisition  rates  and  from  the  results,  as  certified  by  expert 
examiners,  will  determine  upon  such  revision  as  fair  and  equitable  treatment  of  the 
owners  of  the  requisitioned  vessels  may  require.  Revisions  will  be  made,  if  reasons 
therefor  are  found  to  exist,  at  intervals  of  not  more  than  90  days. 

At  the  request  pf  the  board,  the  present  investigation  was  undertaken  in  order  to 
carry  out  the  plan  of  periodic  revision.  It  was  hoped  that  it  would  be  i)ossible  to 
obtain  complete  costs  of  operation  of  vessels  operated  by  the  board,  for  the  purpose  of 
comparison  with  such  costs  of  operation  as  might  be  obtained  from  private  ship- 
owners. The  Shipping  Board*s  accounts,  however,  are  not  yet  in  a  condition  to 
furnish  figures  by  which  comparison  can  be  made  with  the  cost  accounts  as  kept  by 
private  shipowners.  Accordingly,  as  far  as  operating  expenses  are  concerned,  the 
investigation  has  necessarily  been  limited  to  figures  furnished  by  shipowners.  The 
contract  department  of  the  Division  of  Operations  has  sent  to  all  shipowners  who  have 
operated  vessels  under  the  time  form  of  requisition  charter  a  form  to  be  filled  out 
showing  their  operating  expenses.  The  response  to  this  request  for  information  has 
been  unsatisfactory,  reports  having  been  received  on  but  few  vessels.  More  reports 
are  expected  by  the  contract  department,  but  it  has  not  been  deemed  wise  to  delay 
this  report  further  on  that  account.  Expenses  of  operation  are,  moreover,  only  a 
part  of  the  basis  for  requisition  rates.  The  data  on  cost  of  constniction  of  vessels  are 
fairly  complete.  Practically  all  the  American  shipbuilders  have  furnished  to  the 
board  the  costs  of  the  ships  constructed  by  them.  Nevertheless,  figures  are  meager 
for  many  classes  and  speeds  of  vessels. 

In  spite  of  the  incompleteness  of  the  iiifoimation  upon  which  the  present  recom- 
mendations are  based,  it  is  believed  that  they  are  the  best  that  can  now  be  made. 
The  rates  recommended  are.  on  the  whole,  higher  than  the  British  rates.  (The  British 
scale  is  appended  to  this  memorandum,  for  the  purpose  of  comparison.)  Revision, 
in  the  light  of  additional  information,  can.  if  desired,  be  made  at  the  end  of  90  days. 

An  equitable  requisition  rate  can  not  be  based  solely  on  statistical  data.  In  making 
up  the  present  scale,  it  has  been  constantly  borne  in  mind  that  the  question  of  how 
much  should  be  paid  to  the  owners  of  requisitioned  ships  is  the  practical  one  of  what 
is  fair  compensation  for  the  property  taken.  Although  it  is  recognized  that  the 
Shipping  Board,  acting  as  trustee  of  public  funds  in  making  payments  to  the  owners 
of  requisitioned  ships,  can  not  pay  more  than  the  just  compensation  to  which  the 
owners  are  legally  entitled,  nevertheless  what  is  just  compensation  can  not  be  deter- 
mined with  mathematical  exactness.  It  is  b(4ieved.  however,  that  the  board  will  be 
justified  in  adopting  the  scale  now  recommended. 

As  a  result  of  the  investigation,  the  following  scale  of  requi«qtion  rates  is  recom- 
mended for  adoption  bv  the  board: 

51 


52  OCEAN  RATES  AND  TERMINAL  CHARGES. 

NEW  SCALE  OF  REQUISITION  RATES. 

TIME  FORM  OF  REQUISITION  CHARTER. 

Steel  cargo  vessels  and  tankers.  Per  dead-weight 

ion  per  month. 

Over  10,000  tons  dead-weight,  time  form  of  requisition  charter; $5.  25 

8,001  to  10,000  tons  dead-weight,  time  form  of  reciuisitiou  charter 5.  50 

(<>.00l  to  8.000  tons,  dead-weight,  time  form  of  requisition  charter 5.  75 

4.t)01  to  6,000  tons  dead-weight,  time  forai  of  requisition  charter 5.  00 

8.001  to  4.000  tons  dead-weight,  time  form  of  requisition  charter 6.  25 

2.501  to  3,000  tons  dead-weight,  time  form  of  requisition  charter 6.  50 

2.500  and  under,  dead- weight,  time  form  of  requisition  charter 6.  75 

In  addition  to  the  ahove  rates,  the  owner  will  l)e  reimbui-sed  for  all  proper  war 
bonuses  paid  to  officei-s  and  crews  and  for  all  proper  increases  in  wages  over  the  standard 
wage  scale  established  l)y  the  United  States  Ship])ing  Board  as  of  May  4,  1918. 

Vessels  of  speed  in  excess  of  11  knots  ydW  be  allowed  15  cents  per  dead-weight  ton 
per  month  for  each  knot  or  i)art  of  a  knot  over  11  knot*i. 

Passenge"  steamers . 

There  will  be  only  one  class  of  passtniger  steamers,  instead  of  two.  as  heretofore. 
Steamers  with  a  capacity  of  over  75  passengers  will  be  regarded  as  passenger  vessels. 
If  a  passenger  vessel  would  receive  a  greater  hire  at  the  rate  for  steel  cargo  vessels  and 
tankers,  her  hire  will  \yo  paid  at  that  rate. 

Time  form  of  requisition  charter.  $S  per  ton  gross  register  per  month. 

In  addition  to  the  above  rate,  the  owner  will  be  reimbursed  for  all  proi)er  war 
bonuses  paid  to  officers  and  crews  and  for  all  proper  increases  in  wages  over  the  standard 
wage  scale  established  by  the  United  States  Shipping  Board  as  of  May  4,  1918. 

Vessels  of  speed  in  excess  of  11  knots  \si\\  be  allowed  15  cents  i)er  ton  gross  register 
per  month  for  each  kncn  or  part  of  a  knot  over  11  knots.  This  allowance  Anil  not  stop 
at  15  knots,  as  heretofore. 

BAREBOAT  FORM  OF  REQIISITION  CHARTER. 

•    Steel  cargo  vessels  and  tankers.  ^im'^^r'mln^. 

Up  to  and  including  1 1  knots $3.  25 

For  each  knot  or  part  of  a  knot  over  1 1  knots 15 

Passenger  steawers.  P"  '^''^r  mrath^^'^'^ 

Up  to  and  including  1 1  knots $4.  35 

For  each  knot  or  part  of  knot  over  11  knots 1» 

Reasons  Why  the  Foregoing  Scale  is  Recommended. 

the  same  rate  for  old  and  new  ships. 

Ships  are  paid  the  same  rate  regardless  of  age  or  condition.  This  is  true  of  the 
requisition  scale  now  in  force,  and  is  the  British  practice.  The  labor  involved  in 
making  a  separate  valuation  of  each  vessel  would  be  so  great  that  the  adoption  of  an 
average  is  necessary.  A  classification  according  to  the  year,  or  period  of  years,  in 
which  the  vessel  was  built  would  not  be  fair  because  of  the  large  number  of  vessels 
which  have,  in  recent  years,  been  reconstructed.  Moreover,  the  charter  value  of  a 
ship  does  not  ordinarily  A'ary  much  according  to  age. 

DEPRECIATION    AND   RETURN    ON    INVESTMENT. 

The  rate  under  the  time  form  of  charter  consists  of  the  bareboat  rate  plus  cost  of 
operation  and  compensation  for  services  rendered.    Since,  under  the  bareboat  form  of 


OCEAN   RATES   AND   TERMINAL   CHARGES. 


53 


charter  the  owner  is  relieved  of  all  operating  duties,  the  bareboat  rate  is  purely  for 
depreciation  and  return  on  investment.  The  figure  of  $3.35  per  dead-weight  ton  per 
month  has  been  arrived  at  by  taking  20  per  cent  per  annum  of  a  valuation  of  $200  per 
dead-weight  ton.  Twenty  per  cent  per  annum  may  seem  a  large  return,  e8i)ecially  on  a 
valuation  as  high  as  $200,  but  it  is  believed  to  be  justifiable.  Five  per  cent  for  normal 
depreciation,  5  per  cent  for  the  heavy  depreciation  due  to  the  wear  and  tear  of  war 
conditions,  and  10  per  cent  return  on  investment  seems  fair  and  even  liberal.  No 
further  profits  should  be  allowed,  since  the  Government  has  assumed  all  risks.  It  is 
thought  that  the  rates  may  be  based  on  a  valuation  of  $200  in  order  to  give  due  allow- 
ance to  all  the  changed  conditions  produced  by  the  war.  If  $200  is  taken  as  the  basis 
of  the  requisition  schedule,  the  owner  should  not,  however,  be  allowed  anything  for 
amortization,  since  in  practically  all  cases  he  is  being  paid  a  return  on  a  valuation  much 
in  excess  of  actual  costs.  Reports  to  the  Shipping  Board  from  shipbuilders  on  143 
requisitioned  cargo  vessels  and  tankers,  of  11  knots  and  less,  half  of  which  were  built 
since  January,  1915,  show  an  average  cost  of  $71.  Only  8  of  these  ships  cost  over  $100. 
Of  these,  3  cost  between  $100  and  $110,  2  cost  between  $120  and  $130,  I  cost  $143,  and 
2  cost  between  $170  and  $180. 

An  alternative  basis  of  calculation  leads  to  the  same  figure  of  $3.35  per  dead-weight 
rt)n  per  month.  If,  instead  of  taking  the  valuation  of  $200,  we  take  $145,  which  is  a 
liberal  figure  for  the  actual  construction  costs  of  these  ships,  and  do  allotv  the  ship- 
owners to  amortize  that  construction  cost  down  to  $100  in  three  years  from  January  1, 

1918,  we  have  as  follows: 

Per  annum. 

5  per  cent  of  $100,  for  normal  depreciation $5. 00 

5  per  cent  of  $100,  for  depreciation  due  to  war  conditions 5. 00 

10  per  cent  of  $145,  return  on  investment _ 14.  50 

J  of  $45,  amortization 15.  00 

39.5a 
»3.29 

The  British  time-form  rate,  in  the  case  of  tugs  and  similar  craft  where  the  rate  is 
fixed  specially  for  each  ship  and  not  in  accordance  with  a  general  scale,  is  based  on 
"the  actual  running  expenses  plus  depreciation  at  4  per  cent  on  prime  cost,  plus  15 
per  cent  on  prewar  value,  or,  if  acquired  during  the  war,  on  first  ccwt  to  the  present 
owner." 

DEPRECIATION    AND    RETURN    ON    INVESTMEJ^T — PASSENGER   STEAMERS. 

The  old  requisition  scale  now  in  effect  defines  passenger  steamers  as  those  with  a 
capacity  of  over  75  passengers.  The  present  investigation  indicates  that  this  classifi- 
cation is  correct.  A  steamer  accommodating  less  than  75  passengers  is  substantially 
a  freighter. 

The  bareboat  rate  for  passenger  steamers  has  been  obtained  by  taking  20  per  cent 
per  annum  on  a  valuation  of  $260  per  ton,  gross  register.  This  figure  is  possibly  greater 
than  present  reproduction  costs,  but  it  bears  the  same  relation  to  $200  per  dead-weight 
ton  as  the  construction  cost  of  requisitioned  passenger  vessels  bears  to  the  construction 
cost  of  requisitioned  cargo  vessels  and  tankers.  The  shipbuilder's  reports  above 
referred  to  show  that  requisitioned  passenger  vessels  of  1 1  knots  cost  less  than  $91  per 
ton,  gross.  If  $71  be  taken,  for  this  purpose,  as  the  average  cost  of  cargo  boats  and 
tankers,  then  71:91=200:260  approximately. 

It  should  be  borne  in  mind  that  this  vahiation  is  for  a  passenger  ship  making  II 
knots  or  under.  Most  passenger  vessels  are  of  greater  speed,  and  receive  an  allowance 
for  the  greater  cost  due  to  that  factor.    The  allowance  for  speed  is  discussed  below. 


1  Per  month. 


54 


OCEAN  RATES  AND  TEBMINAL.  OHABGBS. 


(The  allowance  for  speed  amoiinta  to  a  return  of  20  per  cent  on  a  capital  investment 
of  $9  per  knot  per  ton,  gross  register.) 

It  may,  nevertheless,  be  equitable  for  the  board  to  make  an  additional  allowance 
in  special  cases  for  large,  high-class  passenger  liners  and  other  passenger  vessels  with 
peculiarly  expensive  equipment. 

OPERATING    EXPENSES. 

The  old  requisition  rates  now  in  effect  do  not  differentiate  between  war  zone  and 
safe  zone,  and  hence  diflcriminate  against  the  owners  who  may  pay  war  bonuses  to 
officers  and  crews.  The  fairest  solution  seems  to  be  to  base  rates  on  costa  in  safe  trades, 
the  Government  to  pay  all  war  bonuses. 

The  allowances  for  expenses  of  operation  are  based  on  the  reports,  already  referred 
to,  made  to  the  Contract  Department  by  shipowners  operating  under  the  time  form  of 
requisition  charter.  The  following  reports,  all  on  cargo  boats  in  safe  trades,  have  been 
received : 


Dead-weight  tonnage  of  ship  reported  on— 


11,300 
9,200. 
5,800. 
4,050. 
3,600. 
3,300. 
2,750. 


Expensesfoer 
dead-weight 

overed 

ton  per 

port. 

month, 

including 
overhead. 

67 

SI.  96 

188 

1.55 

205 

1.70 

215 

2.40 

258 

2.50 

230 

2.06 

234 

2.82 

On  the  basis  of  these  reports,  $3.40  has  been  added  to  the  bareboat  rate  on  steamers 
of  less  than  2,500  tons  to  cover  operating  expenses,  OAerhead,  and  compensation  for 
services  rendered;  $3.15  on  steamers  of  2,501  to  3,000  tons;  $2.90  on  steamers  of  3,001 
to  4,000  tons;  and  similar  reductions  for  larger  vessels,  as  follows: 


Dead-weight  tonnage. 


Hare  boat 

rate  (per 

dead- weight 

per  month.) 

Allowance 
for  operating 

Total  (I.  e., 
time-form 

expenses  (rxr 
dead-weight 
per  month). 

rate  per 
doad-weight 
per  month;. 

$3.35 

$1.90 

$5.25 

3.35 

2.15 

&«6 

3.35 

2.40 

5.7S 

3.S5 

2.65 

6.00 

3.35 

2.90 

6. 25 

3.35 

3.15 

6.60 

S.36 

3.40 

6.75 

Over  10,000 

8,00Uo  10,000... 
6,001  to  8,000..., 
4,001  to  6,000... 
3,001  to  4,000... 
2,501  to  3,000..., 
2,500  and  under 


OPERATING   EXPENSES — PASSENGER  STEAMERS. 

The  original  requisition  scale  now  in  effect  gives  a  higher  rate  for  passenger  vessels 
with  a  capacity  of  over  150  passengers  than  for  those  of  less  than  150  passengers.  In  the 
scale  here  recommended  this  classification  has  not  been  retained.  Expenses  per  ton 
normally  decrease  as  the  size  of  the  ship  increases.  The  data  at  hand,  however,  are  not 
sufficient  to  warrant  making  a  reduction  for  the  larger  ships. 


CUBAN   RATES  AND  TERMINAL  CHARGES. 


55 


Expenses  of  passenger  liners,  in  safe  trades,  as  shown  by  the  reports  to  the  Contract 
Department,  are  as  follows: 


Gross  tonnage  of  ship  repwted  on. 


10,261 
9,728. 
8,797. 
6,135. 
6,282. 
6,279. 


Expenses  per 

ton,  gross  per 

month, 

including 

overhM^ 


t2.4t 
2.32 
8.87 
8.91 
8.  IS 
Z.U 


On  the  basis  of  these  figures,  the  rate  of  $8  in  the  old  scale  has  been  retained.  This 
amounts  to  an  addition  to  the  bare  boat  rate  of  $3.65  per  ton,  gross,  for  operating 
expenses. 

The  allowance  for  operating  expenses,  both  for  passenger  and  freight  vessels,  are 
increases  over  the  old  rates  now  in  effect.  These  allowances  have  been  made  upon  the 
understanding  that  new  charter  forms  will  be  adopted  containing  the  usual  commercial 
offhire  clause,  as  explained  below. 

ALLOWANCE   FOR   SPEED. 

1.  Steel  cargo  vessels  and  tankers. — ^The  justification  for  an  extra  allowance  for  speed 
lies  (1)  in  the  extra  cost  of  machinery  necessary  to  make  a  ship  move  faster  than  11 
knots,  and  (2)  the  hire  lost  by  reason  of  the  decreased  dead-weight  due  to  the  weight 
of  the  extra  machinerj\ 

Under  the  old  scale  now  in  effect,  the  increase  began  with  vessels  of  over  11  knots. 
The  correctness  of  beginning  the  extra  allowance  at  this  point  is  borne  out  by  this 
investigation.  One  hundred  and  sixteen  requisitioned  vessels  of  up  to  and  including 
10  knots,  on  which  figures  were  obtainable,  show  an  average  of  0.305  horsepower  per 
dead-weight  ton,  and  47  vessels  of  over  10  and  including  11  knots  average  0.318 
horsepower  per  dead-weight  ton,  whereas  19  vessels  of  over  11  and  up  to  12  knots 
average  0.409  horsepower  per  dead-weight  ton,  and  for  the  higher  speeds  the  increase 
of  horsepower  per  dead-weight  ton  is  similarly  large. 

The  loss  of  dead-weight  capacity  due  to  greater  speed  was  reached  in  the  following 
manner: 

Let  x=loss  in  dead-weight  of  any  known  ship  of  over  11  knots. 
.310=a8sumed  horsepower  per  dead-weight  ton  on  vessels  of  11  knots  and  less. 
.2=assumed  weight  in  tons  of  machinery  necessary  to  develop  1  horsepower, 
h.  p.=known  horsepower  of  the  known  ship  of  over  11  knots, 
d.  w.= dead-weight  of  the  known  ship  of  over  11  knots. 
1  hen  x=0.2  horsepower.    0.310  (dead-weight  x). 
0.2  horsepower.    0.062  dead-we^ht. 
L062 

By  applying  this  formula  to  various  typical  ships  of  speeds  in  excess  of  11  knots,  it  is 
found  that  the  loss  in  dead-weight,  at  $3.35  per  month,  when  distributed  over  the 
actual  dead-weight  of  the  ship,  amounts  to  about  6^  cents  per  knot  per  dead-weight 
ton  per  month. 

The  horsepower  per  dead-weight  ton  per  knot  on  requisitioned  vessels  upon  which 
data  were  available  averages  about  0.100.  If  $50  per  horsepower  be  assumed  as  the 
cost  of  machinery,  then  $50  XO.IOO,  or  $5,  is  the  cost  of  machinery  per  dead-weight 
ton  per  knot.  Using  the  basic  rate  of  return  of  20  per  cent  per  annum,  this  would  be 
10.083  per  dead-weight  ton  per  month  per  knot;  $0,083  added  to  6^  cents  makes  the 
15-cent  allowance  in  the  scale. 


Mw  '  '.^uy 


56 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


An  attempt  was  made  to  check  this  allowance  by  comparing  the  construction  costs 
of  vessels  of  the  various  speeds.  These  costs,  as  shown  by  the  shipbuilders'  reports 
already  referred  to,  are  as  follows: 


Speed  in  knots. 


M 

18 

14 

U 

1«...... 

Over  Id 


Number  of 

vessels 
reported  on. 


Average 

cost  per 

deaa- 

weight 

ton. 


These  costs  are  obviously  inconclusive.  They  indicate,  however,  that  other  factors 
are  as  important  as  speed  in  effecting  cost  of  construction,  and  if  these  other  factors  are 
disregarded  in  the  requisition  rate,  that  too  much  attention  should  not  be  given  to 
speed.  If  $50  a  horsepower  seems  low,  in  view  of  war  conditions,  these  costs  are  a 
reason  for  not  increasing  it. 

2.  Passenger  steamers. — Since  the  hire  of  passenger  vessels  is  paid  on  their  gross  ton- 
nage, no  allowance  should  be  made  for  loss  of  dead-weight  capacity  due  to  increased 
speed.  The  only  factor  is  an  increased  cost  of  engines.  The  average  difference  per 
knot  was  found  to  be  0.140  horsepower  per  ton,  gross.  At  $50  a  horsepower,  the  con- 
struction cost  of  machinery  would  be  $7  per  knot  per  ton,  gross.  At  20  per  cent  per 
annum,  this  would  be  $0,115  per  knot  per  month  per  ton,  gross.  In  order  not  to  allow 
less  per  ton,  gross,  for  passenger  ships  than  per  dead-weight  ton  for  freight  vessels,  15 
cents  has  been  adopted  for  passenger  vessels. 

The  shipbuilders'  reports  on  the  costs  of  passenger  vessels'  capacity  are  as  unsatis- 
factory as  those  on  cargo  boats.    They  are  as  follows: 


Speed  in  knots. 


11. 
12. 
13. 
14. 
15. 
16. 
17. 
18. 
19. 


Niunberof 
vessels  re- 
ported on. 


Average 

cost  per 

ton  gross. 


S89 
76 
150 
139 
132 
105 
118 


318 


REQUISITION   CHARTER. 

In  general  the  rates  have  been  predicted  on  the  operation  of  the  vessels  under  the 
regular  requisition  charter  (U.  S.  S.  B.  Charter  Form  No.  2).  As  the  rate  schedule 
is  based,  however,  on  operating  expenses  in  safe  trades,  all  war  bonuses  are  to  be  paid 
by  the  Government.  The  old  schedule,  which  contemplated  the  payment  of  wai 
bonuses  by  the  owners,  was  less  favorable  to  ships  employed  in  the  trans-Atlantic 
service  than  to  those  employed  elsewhere.  The  time  form  owners  have  been  allowed 
a  larger  differential  over  the  bareboat  rate  than  was  allowed  under  the  old  schedule, 
not  only  because  it  was  thought  a  fairly  liberal  compensation  should  be  made  for  the 
services  of  the  owners'  organization,  but  because  it  is  assumed  that  the  time  form 
requisition  charter  will  be  modified  so  as  to  place  the  vessels  offhire  in  event  of  their 
inefficiency,  in  accordance  with  the  usual  Government  form  time  charter. 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


67 


It  is  understood  that  the  Admin^lty  Counsel  contemplates  certain  other  changes  in 
the  requisition  charter  to  safeguard  the  board's  legal  rights.  These  would  not,  how- 
ever, have  any  direct  bearing  on  the  requisition  schedule. 

BRITISH   REQUISITION    RATES. 

These  are  the  present  British  rates,  containing  the  changes  effective  March  1,  1918. 
Exchange  has  been  computed  at  $4.75  per  pound  sterling. 

OCEAN  PASSENGER  LINERS. 

Class  1. — Armed  merchant  cruisers. 
"  B2"  Form  ChartOT— with  demise  to  the  Crown. 


Speed  of  vessel. 


22  knots  and  over 

21  knots  and  iinder  22 
20  knots  and  under  21 
19  knots  and  under  20 
18  knots  and  under  19 
17  knots  and  under  18 
16  knots  and  under  17 
15  knots  and  under  16 
14  knots  and  under  15 


Rate  of  hire  per 

ton  gross 

register 
ontn. 

perm 

.S'. 

DoUars. 

25 

5.94 

24 

5.70 

23 

5.46 

22 

5.23 

21 

4.99 

20 

4.75 

17 

4.04 

15 

3.56 

14 

3.33 

Period — ^three  months  certain. 

If  period  of  employment  is  in  excess  of  three  months  rate  to  be  Is.  per  ton  less  in 
each  case  in  respect  of  any  period  in  excess  of  three  months. 

The  rates  to  be  reduced  by  30  per  cent  in  the  case  of  vessels  of  17  knots  and  over 
and  by  20  per  cent  in  the  case  of  vessels  of  less  than  17  knots,  the  reduction  to  take 
effect  as  from  1st  October,  1915,  if  the  vessels  had  then  been  on  service  for  one  year, 
and  from  date  of  completion  of  one  year's  service  in  other  cases. 

Class  II. —  Vessels  conveying  troops,  etc.,  for  the  Expeditionary  Forces. 

{Expeditionary  Force  charter.] 


Speed  of  vessel. 


15  knots  and  under  17 
14  knots  and  under  15 
13  knots  and  imder  14, 
12  knots  and  xmder  13. 
Under  12  knots 


Rate  of  hire  per 

ton  gross 

register 
ontn. 

perm< 

*. 

d. 

DoUars. 

17 

6 

4.16 

16 

6 

3.92 

15 

6 

3.68 

14 

6 

3.44 

13 

6 

3.21 

If  period  on  hire  be  less  than  one  month,  special  terms  to  be  arranged. 
If  period  is  in  excess  of  two  months,  rate  t»  be  6d.  per  ton  less  in  each  case  in  respect 
of  any  period  in  excess  of  two  months. 

Class  I II. —Hospital  ships  and  hospital  carriers. 
("A"  form  charter.] 


Speed  of  vessels. 


14  knots  and  over. 
Under  14  knots... 


Rate  of  hire  per 

ton  gross  raster 

per  montn. 


«.    d.    DoUars. 
17    6        4.16 
16    6        3.92 


Period— three  months  certain. 


i 


58 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


If  period  of  employment  is  in  excess  of  three  months,  rate  to  be  6d.  per  ton  leas  in 
each  case  in  respect  of  any  period  in  excess  of  three  months,  such  reduction  being 
applicable  to  the  whole  period  of  employment  in  the  event  of  itf  exceeding  six  months 
in  all. 

CARGO  LINERS. 

Class  I. —  Vessels  of  4,000  tons  and  over. 
[Expeditionary  Force  charter  party.) 


Speed  of  vessel. 


Rate  of  hire  per  ton  gross 
raster  per  month. 


After  2  months. 


13  knots  and  over 

12  knots  and  under  13 
11  knots  and  under  12 
10  knots  and  under  11 
Under  10 


». 
14 
13 
12 
12 
11 


d. 
9 
9 
9 
3 
9 


DoUar*. 
3.50 
3,27 
3.03 
2.91 
2.79 


Minimum  period  of  hire  to  be  one  calendar  month,  but  this  is  to  bo  reduced  where 
owners  have  l>een  able  to  employ  their  vessels  l^efore  the  expiry  of  a  month. 

Veaeels  of  3.000  tons  and  under  4,000,  6d.  extra. 

Vessels  of  2,000  tons  and  under  3.000.  Is.  extra. 

Vessels  under  2,000  tons.  Is.  6d.  extra. 

Vessels  with  shelter-deck  accommodations  not  included  in  the  grosa  tonnage  should 
have  special  consideration  l)eyoiid  these  rates. 

Class  II. — Supply  Ships. 

CHARTER  P.ARTY    B    (wiTH  DEMISE  TO  THE   CROWN). 

The  ships  to  receive  the  same  rates  as  Class  I,  with  appropriate  reduction  for  differ- 
ence in  terms  between  A  and  B  form  of  charter. 

The  question  as  to  which  clsss  individual  requisitioned  vessels  should  be  placed 
in  should  be  settled  between  the  Admiralty  and  the  owners. 

PASSENGER.    COASTING.    AND   CHANNEL   STEAMERS. 

I  (a)  Passenger  aiid  cargo  ships — Expeditionary  Force  charter  party. — The  subcom- 
mittee recommend  the  following  scale,  bae<ed  on  the  recommendations  of  the  ocean 
passenger  liner's  subcommittee,  with  an  addition  to  meet  the  case  of  these  small  ves- 
sels, which  are  almost  all  under  2.000  tons  gross  and  of  good  speed. 


Speed. 


15  knots  and  under  16 
14  knots  and  under  15 
13  knots  and  under  14 
12  knots  and  under  13 
Under  12  knots 


Rate  of  hire  per 
ton  gross  register 
per  montn. 


•. 

d. 

DoUart. 

20 

0 

4.75 

18 

9 

4.46 

17 

6 

4.16 

16 

6 

3.86 

16 

0 

8.66 

OCEAN  RATES  AND  TKRMINAL  CHARGES. 


59 


If  period  of  employment  is  in  excess  of  two  months,  rate  to  be  6d.  per  ton  less  in 
each  case  for  any  period  in  excess  of  two  months. 

Special  arrangements  to  be  made  if  period  of  employment  is  less  than  one  month 
and  the  owner  on  nondelivery  can  not  at  once  utilize  his  ship. 

The  above  scale  not  to  apply  to  railway  ships,  which  come  under  the  general  set- 
tlement between  the  Government  and  the  railway  companies,  or  to  some  exceptional 
cases,  where  a  whole  fleet  of  fast  ships  was  requisitioned  by  Government  at  one  time 
and  special  treatment  must  clearly  be  accorded. 

I  (6)  Cargo  ships  only — Expeditionary  Force  charter  party. — The  subcommittee 
recommend  the  scale  laid  down  by  the  cargo  liner's  subcommittee  for  vessels  of  the 
size  in  question,  viz: 


Speed. 


13  knots  and  over 

12  knots  and  under  13 
11  knoto  and  under  12 
10  knots  and  under  11 
Umer  10  knots 


Rate  of  hire  per  ton  gross 
register  per  month. 


Tons,  2,000 
and  under 

3,ooa 


9.  4. 
16  3 
15  3 
14  3 
13  9 
U    3 


Tons,  under  2,000. 


*.  d.  DoOan. 

16  9  3.98 
3.74 
3..'i0 
8.38 
3.37 


15  9 

14  9 

14  3 

13  9 


A  reduction  of  6d.  per  ton  to  l)e  made  in  all  cases  for  any  period  the  ship  is  employed 
beyond  one  month. 

The  same  stipulation  as  under  I  (a)  for  periods  of  less  than  one  month. 

Vessels  with  shelter-deck  accommodation  not  included  in  the  gross  tonnage  should 
have  special  consideration  beyond  these  rates. 

II.  Admirality  charter  party  B. — For  the  general  run  of  the  coasting  and  short  traders 
working  under  this  charter  party  the  subcommittee  recommend  the  above  scales,  lees 
an  agreed  allowance  per  gross  ton  per  month  for  the  cost  of  crew  and  stores. 

The  questions  as  to  which  class  individual  requisitioned  vessels  should  be  placed  in 
will  be  settled  between  the  Admiralty  and  the  owners. 

Tank  steamers. 


Dead-weight  tons. 


10,001  and  over. 

9,001-10,000 

8,001-9,000 

7,001-^000 , 

6,001-^000 , 

5,001-6,000 

4.001-6,000 

Under  4,000...., 


Rate  per  ton 
dead-weight. 


«. 

9 

9 

9 

9 

10 

10 

10 

11 


d.  Dollars. 


3 
6 
9 
9 
0 
3 
6 
0 


2.20 
2.26 
2.32 
2.32 
2.38 
2.43 
2.49 
2.61 


The  Admiralty  agree  to  refund  to  the  tank  steamship  owners  the  extra  wages  paid 
to  the  crews  of  requisitioned  ships  in  excess  of  those  normally  obtained  at  the  begin- 
ning of  the  war,  as  from  the  date  of  requisition,  and  other  conditions  being  agreed  to 
aa  'ptr  Blue  Book. 


ii 


60 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


TRAMPS   AND   SMALL  STEAMERS. 


The  following  Revised  Scale  (N.  of  S.  185/18)  for  application  only  in  the  case  of 
vessels  classed  as  tramps  or  small  steamers  has  been  fixed  by  the  controller  of  ship- 
ping, with  the  agreement  of  the  Chamber  of  Shipping  of  the  United  Kingdom,  the 
rates  to  come  into  force  on  and  from  March  1,  1918: 


Class. 


301-450  gross  register 

451-600,  gross  register 

601-750,  gross  register 

751-900,  gross  register , 

900,  gross  register-1,300  dead- weight . 

1,301-1,000  (lead-weight 

1,801-2,200  dead-weight , 

2,301-3,000  dead-weight 

3,001-4,000  dead-weight 

4,001-5,000  dead-weight 

5,001-7,000  dead-weight 

Over  7,000  dead- weight 


Rate  to 

Feb.  28, 

Rate  from  Mar. 

1918  (per 

1, 1918  (per  gross 

gross  regis- 

register ton). 

ter  ton). 

*.  d. 

*.  d.  DoUarn. 

19  6 

29  0 

6.89 

18  6 

25  0 

5.94 

17  6 

23  0 

5.46 

16  0 

21  6 

5.11 

15  6 

20  0 

4.76 

13  6 

17  6 

4.16 

13  0 

17  0 

4.04 

12  6 

17  0 

4.04 

12  0 

16  6 

3.92 

11  6 

16  0 

3.56 

11  0 

14  0 

3.33 

11  0 

13  6 

3.21 

Note  —The  following  allowances  are  still  payable  in  addition  to  the  revised  rates: 

(1)  AnyaUowances  granted  in  consideration  of  shelter  deck  or  other  spaces  excluded  from  the  gross  register 

tonnage,  „ 

Per  gross  ton 

(2)  For  sliips  under  4.001  tons  dead-weight:  V^  month. 

Double  derricks  and  double  winches  at  each  hatch 9d. 

Self-trimmers 6d. 

(3)  For  vessels  over  1,300  tons  dead-weight: 

On  home  fleet  service 6d 

On  French  service  within  coasting  limits 3d. 

(4)  Fw  vessels  over  1,300  and  under  4,001  tons  dead- weight  while  on  fleet  service  in  fweign  watere. .      3d 

Keepectfully  submitted. 

Walter  T.  Fisher. 


Appendix  II. 


September  20,  1918. 


RETURN  ON  INVESTMENT  (INTEREST,  DEPRECIATION,  AMORTIZATION) 
TO  BE  EARNED  ON  SHIPPING  BOARD  SHIPS. 

(Memorandum  for  Prof.  Johnson.] 

As  a  result  of  examination  into  the  subject  of  what  constitutes  a  proper  return  on 
the  Shipping  Board's  investment  in  ships,  I  recommend  that  $5.10  per  dead-weight 
ton  per  month  be  earned  in  order  to  cover  interest,  depreciation,  and  amortization; 
i.  e.,  that  $5.10  be  adopted  as  the  theoretical  bareboat  rate  used  in  calculating  costs 
in  making  freight  rates  on  cargo  vessels  owned  or  hired  by  the  board . 

This  rate  has  been  arrived  at  in  the  manner  indicated  by  the  table  following. 

61 


62 


OCEAN   RATES   AND   TEBMIKAL   CHARGES. 


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OCEAN   RATES  AND  TERMINAL  CHARGES. 


63 


1.  Amortization. — ^After  the  war,  when  normal  conditions  are  restored,  it  will  be 
impossible  for  ships  to  earn  more  than  a  normal  depreciation  allowance.  Accordingly, 
it  is  necessary  that  some  of  the  high  costs  of  building  ships,  due  to  war  conditions,  be 
gotten  back  by  the  Government  during  the  period  of  the  war.  The  return  which  is 
thus  obtained  may  be  called  an  amortization  allowance.  One  hundred  dollars  a 
dead-weight  ton — one-third  more  than  the  prewar  cost — seems  a  fair  estimate  of  the 
post-war  cost  of  constructing  steel  cargo  vessels,  and  three  years  a  safe  period  to  allow 
for  the  duration  of  war  conditions,  including  the  period  of  actual  war,  peace  nego- 
tiations, bringing  home  troops,  and  the  continuance  of  high  freight  rates  and  values 
thereafter.    This  means  that  we  should  plan  to  amortize  each  year  for  the  next  three 

•  years  one-third  of  the  difference  between  the  actual  cost  of  ships  and  $100  per  ton. 
This  same  recommendation  has  been  made  by  Marwick,  Mitchell,  Peat  &  Co.,  account- 
ants, in  a  report  to  the  Director  of  Operations  on  Depreciation  and  Amortization, 
dated  June  24,  1918,  and  by  Messrs.  Ix)ckhart  and  Houston,  of  the  Division  of  Opera- 
tions, in  their  comment  upon  that  report. 

2.  Interest. — ^The  cost  of  capital  to  the  Government,  including  the  expenses  of 
floating  loans,  is  probably  not  far  from  5  per  cent.  The  United  States  is  charging  the 
Allies  4|  per  cent  for  loans  now  being  made  to  them  and  would  be  justified  in  charging 
them  5  per  cent  on  capital  in  ships  as  part  of  freight  rates  based  on  cost. 

3.  Depreciation. — ^By  depreciation  is  meant  the  yearly  loss  in  value,  due  to  wear  and 
tear,  not  compensated  for  by  current  repairs.  The  rate  of  depreciation  to  be  adopted 
is  largely  determined  by  the  number  of  years  the  ship  will  last.  As  to  the  probable 
life  of  ships,  opinions  differ  widely,  some  estimates  being  as  low  as  10  years  for  steel 
cargo  vessels.  Under  war  conditions,  ships  are  driven  harder  and  are  not  treated  so 
well  as  they  are  in  peace  times,  and  hence  will  have  a  shorter  life.  Furthermore, 
the  depreciation  rate  will  be  fast  during  the  war.  This  fact  suggests  that  the  solu- 
tion of  the  depreciation  problem  lies  in  charging  a  heavy  depreciation  during  the 
war.  Mr.  Frank  S.  Martin,  chairman  of  the  Board  of  Survey  and  Consulting  Engi- 
neers, has  suggested  that  the  rate  of  depreciation  be  10  per  cent  per  annum  during 
the  war  and  5  per  cent  per  annum  thereafter;  and  this  suggestion  has  been  adopted 
with  the  exception  that,  in  order  to  allow  still  further  for  war  conditions,  these  per- 
centages have  been  taken  each  year  as  percentages  of  the  total  valuation  and  not  of 
the  residual  value  (i.e.,  of  the  post-war  cost  of  new  tonnage,  and  not  of  the  inventory 
value  each  year  after  the  previous  year's  depreciation  has  been  deducted).  That 
will  result  in  writing  off  the  entire  value  of  the  steel  cargo  boats  at  the  end  of  17  years, 
assuming  three  years  of  war  conditions. 

Marwick,  Mitchell,  Peat  &  Co.,  in  their  report  already  referred  to,  have  expressed 
depreciation  as  a  percentage  of  the  total  cost,  including  the  amount  which  is  being  amor- 
tized. However,  when  a  certain  part  of  the  total  cost  is  being  written  off  by  amorti- 
zation, and  a  certain  other  part — ^all  the  rest — is  being  written  off  by  depreciation, 
it  seems  clear  that  the  annual  depreciation  allowance  is  not  related  to  the  amount 
that  is  written  ofl  by  amortization,  and  that  it  is  misleading  to  express  depreciation 
as  to  a  percentage  of  an  amount  which  includes  the  amount  to  be  amortized.  In 
the  foregoing  table,  depreciation  is  expressed  as  a  percentage  of  the  estimated  post- 
war cost  of  construction;  i.  e.,  of  $100. 

4.  Construction  costs. — Freight  rates  are  made  for  the  future.  WTien  a  rate  is  once 
decided  upon — and  this  is  especially  true  of  such  a  rate  as  that  of  wheat  from  the 
Pacific  coast,  which  is  the  result  of  conference  and  agreement  wiih  important  inter- 
ests and  with  governmental  bodies — it  is  not  advisable  to  change  it  for  a  number  of 
months.  For  the  purpose  of  making  freight  rates,  therefore,  the  cost  of  ships  during 
the  coming  year  is  the  important  thing  and  not  the  cost  of  ships  already  delivered . 
Hence,  Marwick,  Mitchell,  Peat  &  Co.'s  estimates  of  the  cost  of  particular  ships 
already  delivered,  as  stated  in  the  report  above  referred  to,  are  probably  not  so  sig- 


64 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


nificant  for  the  present  purpose  as  the  estimates  made  by  the  Fleet  Corporation  in 
Philadelphia,  as  of  August  15,  1918,  of  the  costs  of  ships  in  the  following  classes: 

Class  1.  Partly  built  ships  taken  over  and  completed. 

Class  2.  Tonnage  contracted  for  up  to  August  15,  1918. 

Class  3.  Additional  program  for  completion  up  to  December  31,  1919. 

These  estimates  (based  on  Emergency  Fleet  Corporation  Confidential  Table  of 
Estimated  Construction  and  Expenditure,  lOO-Sl^-l)  shows  the  following  costs: 

STEEL  CARGO  VESSELS. 


Class  1 

Class  2 

Class  3 

All-steel  cargo  vessels 

WOODEN  CARGO  VESSELS. 

Class  1 

Class  2 

Class  3 

All-wooden  cargo  vessels 


Dead-weight 
tons. 


1,897,126 

8,152,605 

331,449 


10,381,180 


Average 

cost  per 

ton. 


$174.00 
197.00 
223.00 


193.50 


None. 

2,217,750 

611,000 


2,828,750 


$191.00 
168.00 


186.00 


The  wooden  tonnage  must  be  averaged  in  some  way  with  the  steel,  since  freight 
rates  will  be  the  same  on  wooden  ships  as  on  steel  ships.  Wooden  ships  depreciate 
faster  than  steel,  and  in  the  long  run  they  will  probably  be  no  cheaper  than  the  steel 
ships.  Hence  if  $215  be  taken  to  be  the  proper  valuation  of  steel  ships,  a  return  on 
this  amount  may  also  be  taken  as  a  proper  return  on  wooden  ships.  To  illustrate, 
if  we  should  depreciate  and  amortize  $186,  the  average  cost  per  dead-weight  ton  of 
wooden  ships,  by  the  method  of  writing  off  $85  ^  by  depreciation  and  the  remainder 
($101)  by  amortization,  and  assume  a  life  of  seven  years  as  Messrs.  Lockhart  and  Hous- 
ton have  done,  a  table  made  out  on  the  same  principles  as  the  table  for  steel  ships 
would  be  as  follows: 

Table  showing  calcnlatums  to  determine  monthly  return  on  investment  in  wooden  cargo 

steamers. 

[Cost:  $186— 7-year  life.) 


Year. 


Deprecia- 
tion. 


1 
2 
3 
4 
5 
6 
7 


$17.00 
17.00 
17.00 
8.50 
8.50 
8.50 
8.50 


85.00 


Amortiza- 
tion. 


$33.67 
33.67 
33.66 


lOLOO 


Interest. 


$9.30 
6.77 
4.23 


Total 

amount 

which 

mast  be 

earned  per 

annum. 


$59.97 
57.44 
54.90 


Theoretical 

monthly 

bareboat 

rate. 


$5.00 

4.79 
4.58 


1  $85  has  been  selected  because  it  bear?  the  same  ratio  to  $100— the  estimated  postwar  cost  of  steel  ton- 
nage— as  $186  does  to  $223. 


OCEAN   RATES  AND  TERMINAL.  CHARGES. 


65 


The  figures  for  the  theoretical  barelwat  rate  resulting  from  the  foregoing  calcula- 
tion—i.  e.,  $5  and  the  average  figure  of  $4.79  for  the  three  war  years— are  so  near  the 
st^el  figures  that  it  is  simpler  and  approximates  the  same  thing  to  disregard  the 
wooden  tonnage  for  the  purpose  of  making  freight  rates,  and  base  rates  solely  on  8te<»l 
costs.  This  means,  in  substance,  that  the  fact  that  wooden  ships  are  cheaper  than 
steel  does  not  warrant  making  lower  freight  rates  than  would  be  made  on  steel  alone, 
and,  on  the  other  hand,  an  estimated  life  of  seven  years  for  wooden  ships  is  so  low  that 
we  would  not  be  justified  in  charging  higher  rates  than  those  based  solely  on  steel 
tonnage.  The  assumption  of  a  10-year  life  for  wooden  vessels  would  produce  the 
following  results: 

Table  showing  calculations  to  determine  monthly  return  on  investment  in  wooden  cargo 

Steamers. 

[Cost:  $186— 10-year  life.) 


Year. 


1 

2...fv- 

3...'... 

4 

5 

6 

7 

8 

9 

10 


Deprecia- 
tion. 


$13.80 
13.08 
13.08 
6.54 
6.54 
6.-54 
6.54 
6.54 
6.53 
6.53 


85.00 


Amortiza- 
tion. 


$33.67 
33.67 
33.66 


101.00 


Interest . 


.$9.30 
6.96 


63 

29 

96 

63 

31 

.97 

.61 

.33 


Total 

amount 

which 

mast  be 

earned  per 

annum. 


$56.05 
53.71 
.5L37 

8.83 
8.50 

8. 


17 

85 
51 
14 


Theoretical 

monthly 

bareboat 

rate. 


$4.68 

4.48- 

4.28^ 

.74 

,n 

.eg 
.<& 

.82 
.50 

..57 


The  cost  figure  of  $215  per  dead-weight  ton,  which  has  been  taken  for  steel  cargo 
steamers,  seems,  all  things  considered,  a  fair  valuation.  It  is  $8  less  than  the  Fleet 
Corporation  now  estimates  that  future  costs  will  be;  but,  on  the  other  hand,  it  is 
$21.50  more  than  the  cost  of  the  13,000,000  tons  for  which  contracts  have  been  let. 
even  with  the  future  program  averaged  in.  Much  of  this  tonnage  contracted  for  will 
of  course  not  be  completed  for  a  long  time.  One  hundred  thousand  tons  of  Japanese 
ships  (two  years  old  or  less)  cost  $243  per  dead-weight  ton,  but  these  are  offset  b>- 
245,000  tons  of  new  construction  in  Japan  costing  $175  and  by  132,000  tons  of  Great 
Lakes  steamers  costing  $150.  It  is  estimated  that  the  300,000  tons  of  concrete  ships 
will  cost  $140  per  ton,  but  their  future  freight-earning  power  is  so  problematical 
that  a  reduction  of  the  $215  figure  on  their  account  would  hardly  be  justified. 

The  charter  hire  paid  for  the  435,000  tons  (in  commercial  service)  of  requisitioned 
and  chartered  shipping,  bareboat,  must  be  averaged  with  the  return  on  owned  ves- 
sels in  order  to  obtain  the  average  theoretical  bareboat  rate  which  must  be  earned, 
on  Shipping  Board  cargo  ships  to  enable  the  Government  to  break  even.  The  cost 
of  this  hired  shipping,  largely  Dutch,  is  $7.05  per  dead-weight  ton  per  month.  If 
these  435,600  tons  are  averaged  with  a  total  program  of  owned  tonnage  of,  say,  14,000,000 
tons  (Fleet  Corporation,  steel  and  wood,  13,209,930;  Japanese,  345,000;  Great  Lakes,, 
132,000;  concrete,  300,000;  total,  13,986,930)  at  $4.92  per  dead-weight  ton  per  month, 
the  result  will  be  only  $5.  This  figure  is  low  in  \dew  of  the  fact  that  $7.05  is  now 
being  paid  for  435,000  tons  of  shipping  in  actual  existence,  whereas  the  14,000,000 
tons  are  largely  accounted  for  by  ships  yet  to  be  built.  On  the  basis  of  7,000,000' 
tone,  however,  the  average  would  still  be  as  low  as  $5.08.  To  pro\i<ie  this  slight 
margin  above  $5,  $5.10  has  been  recommended. 

118231—19 5 


66 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


The  rate  dupartinent  of  the  Division  of  Operations  is  now  basing  rates  upon  a 
theoretical  bareboat  return  of  $2.66;  i.  e.,  $2.66  per  dead-weight  ton  per  month  is 
allowed  to  cover  interest  and  depreciation,  and  no  allowance  is  made  for  amortiza- 
tion. Recognizing  that  $2.66  is  too  low,  the  rate  department  adds  to  its  final  total 
costs  for  the  various  trips  a  large  sum  for  contingencies.  This  allowance  is,  however, 
probably  not  large  enough  to  bring  the  theoretical  bareboat  rate  up  to  $5.10. 

The  adoption  of  $5.10  as  the  basic  return  on  Shipping  Board  ships  does  not  involve 
paying  an  equally  high  retiu-n  to  the  owners  of  requisitioned  vessels,  for  the  following 

reasons: 

1.  The  Shipping  Board  must  earn  enough  to  enable  it  to  meet  the  high  cost  of 
foreign  requisitioned  and  purchased  ships.  Dutch  ships  cost  $8.31  per  month,  and 
the  Japanese  two-year  old  ships  cost  $243  per  dead-weight  ton. 

2.  The  Shipping  Board  must  earn  enough  to  enable  it  to  meet  the  high  cost  of  the 
ships  which  it  has  constructed.  These  costs  are  much  higher  than  the  costs  of  build- 
ing the  American  ships  which  have  been  requisitioned. 

A  theoretical  bareboat  rate  for  tankers  and  refrigerator  ships  may  be  worked  out 

on  the  same  principles  as  have  been  applied  to  cargo  boats. 

Respectfullv  submitted. 

Waiter  T.  Fishkr. 


Appendix  III. 

SAMPLE  CARDS  FROM  THE  FILE  OF  CHARTER  RATES— SAMPLE  SHEETS 
FROM  THE    SUMMARIES   OF  TRIP   CHARTER  AND    TIME   CHARTER 

RATES. 

Charier  rates. 

Trade:  West  Indies — ^United  States.    Commodity:  

Delivery — orange:  Delivery  North  HatteraiR. 


Date  charter 

reported 

closed. 


Nov.  1,1916..   9  months.. 


Trip  or 
period. 


Charter  rate. 

Ship. 

37/6  per  D.W.T. 
per  month. 

Huftero. 

Flag. 


American.. 


Tonnage. 


Steam 
or  sail. 


Charterer. 


898N.  R.T.  Steam..    Bennett— 

Hvoslef 
!         Co. 


Remarks: 


Charter  rates. 


Trade:  United  States — West  Indies.    Commodity:  Coal. 
Delivery — ^range:  Delivery  Guantanamo. 


Date  charter 

reported 

closed. 

Trip  or 
period. 

Charter  rate. 

Ship. 
Beacon.. 

Flag. 

Tonnage. 

Steam 
or  sail. 

Charterer. 

Jan.  28, 1915.. 

From  Bal- 
timore. 

$2.75  per  D.W.T. 

Norwegian. 

715  N.  R.  T. 

Steam.. 

Munson  Co. 

Remarks: 


Ocean  charter  rates. 
[Rates  between  designated  districts.] 


{ Export:  Steam.    Commodity,  cotton.    Jan.  1,  1914,  to  Aug.  30, 1918.    Rates  in  United  States  currency. 

United  States  Shipping  Board  rate  investigation.) 

1915— TRIP  CHARTER. 


One  way. 


iSouth  Atlantic-United  Kingdom  (east  coast). 

South  Atlantic-French  Atlantic 

South  Atlantic-Holland 

South  Atlantic-Mediterranean 

Gulf-United  Kingdom  (east  coast) 

Gulf-French  Atlantic 

Qulf-Holland 

South  Atlantic-Scandinavia 

Do 

South  Atlantic-Holland 

Gulf-United  Kingdom  (cast  coast) 

Gulf-Scandinavia 

Gulf-Germany 

Gulf-Mediterranean 

<}ulf-French  Atlantic 


Net  form,  '  r^        . 
Form"0."   Gross  form. 


Per  100  lbs.   Per  100  lbs. 


81.61 
1.77 
2.34 
1.80 
1.28 
1.51 
2.40 


$1.96 
'  19,466.66 
2.40 
1.40 
1.92 
3.30 
1.44 
1.86 


1  Lump  sura. 


67 


68  OCEAN   RATES   AND  TERMINAL   CHARGES. 

Ocean  charter  rates. 

[Rates  between  designated  districts.] 

r Jan   1   1914  to  Aug.  30,  1918.    Rates  in  United  States  currency.    United  States  Sliipinng  l^oard  rate 
^       *    '  investigation.] 


1914— TIME  CHARTER. 

Round-trip 
number. 

Period. 

Net 

form, 

D.W.T. 

per 
month. 

Lump 
sum. 

Gross  form. 

D.W.T. 

One  way. 

Per  day. 

Per 
month. 

per 
month. 

United  States- 
Europe  (1). 

$35,000.00 

$1,000.00 

'      Europe  (2). 

United  States- 
Europe  (3). 

United  States- 
Europe  (4). 

$0.72 

United  States- 
United  King- 
dom (2). 

United  States- 
United  King- 
dom (3). 

.86 

.75 

1.14 

United  States- 
United  King- 
dom (5). 

United  States- 
United  King- 
dom (6). 

.84 

1.26 

South  Atlantic- 
Mediterranean. 

South    Atlantic- 
Scandinavia. 

South    Atlantic- 
Denmark. 

North    Atlantic- 
Scandinavia. 

North   Atlantic- 
Mediterranean. 

North    Atlantic- 
French  Atlantic. 

1 

1        .  ... 

1.26 

1 

1 
1 

$19,466.00 

.'>.28 

2.76 

,  .  i 

15,000.00 

17.20 

! 

52,560.00 

DO 

1                                                       1 

Appendix  IV. 

REPORT  UPON  THE  INVESTIGATION    OF  OCEAN  FREIGHT   RATES   AT 
ATLANTIC  AND  GULF  PORTS,  FOR  THE  YEAR  JULY  1, 1917.  TO  JUNE  30. 

By  Dr.  T.  W.  Van  Metre. 

New  York,  December  16,  191S. 
Prof.  Emory  R.  Johnson, 

United  States  Shipping  Board,  Washington,  D.  C. 

My  Dear  Prof.  Johnson:  On  June  18, 1918,  at  your  request,  I  undertoolc  an  investi- 
gation of  the  freight  rates  charged  on  traffic  exported  from  the  Atlantic  and  Gulf 
ports  of  the  United  States  to  foreign  countries  during  the  year  ending  June  30,  1918. 
It  was  understood  that,  to  whatever  extent  possible,  I  should  secure  information  con- 
cerning import  rates.     I  am  now  ready  to  make  a  report  on  this  investigation. 

The  plan  of  work  adopted  was  as  follows:  (1)  Steamship  companies  at  all  Atlantic 
and  Gulf  ports  were  to  be  asked  to  report,  upon  special  forms,  their  export  rates  on  a 
selected  list  of  commodities,  and  any  import  rates  of  which  they  might  have  knowledge. 
(2)  A  card  index  was  to  be  made  of  all  rates  reported. 

This  plan  has  been  carried  out  and  the  work  is  completed. 

It  was  your  thought,  as  it  was  mine,  that  it  would  be  unnecessary  for  the  Shipping 
Board  to  make  any  formal  order  upon  the  steamship  companies  for  a  report  covering 
rates  charged.  We  decided  to  depend  entirely  upon  the  willingness  of  the  companies 
to  cooperate  in  a  work  which  was  to  be  of  service  to  the  Government.  That  we  were 
not  mistaken  in  feeling  that  we  could  depend  upon  voluntary-  cooperation  has  been 
indicated  by  the  almost  unanimous  response  to  the  requests  which  were  sent  out. 
Of  the  companies  operating  vessels  during  the  year  ending  June  30,  1918,  to  which 
requests  for  rates  were  directed,  only  two  refused  to  respond.  These  two  were  the 
Luckenbach  Steamship  Co.  and  the  United  States  &  Brazil  Line,  both  of  New  York. 

Requests  for  rates  were  sent  to  the  following  companies: 


New  York: 

American  Line, 

American  Union  Line. 

American  Cuban  Line. 

Atlantic  Transport  Line. 

Anchor  Line. 

Bacon,  Daniel. 

Barber  Steamship  Line. 

Benham  &  Boysen. 

Booth  &  Co. 

Bliss  Dallett  &  Co. 

Castriotis  &  Co. 

Cosmopolitan  Shipping  Corporation. 

Cunard  Line, 

Elwell  &  Co.  (Fabre  Line). 

Federal  Line. 

French  Line. 

Funch  Edye  &  Co. 

Furness  Withy  &  Co. 

Globe  Line. 

Grace,  W.  R.,  &  Co. 

Holland-American  Line. 


N  ew  York — Continued. 
Houlder  Weir  &  Boyd. 
Houston  Line. 
Italia- America  Line. 
Job,  W.  S.,  &  Co. 
Kerr  Steamship  Corporation. 
Lamport  &  Holt  Line. 
Lloyd  Brasileiro. 
McDonnell  &  Truda. 
Moore  &  McCormack  &  C(^.   (Com- 
mercial South  America). 
Munson  Line. 
Nafra  Co. 
National   Steam   Navigation   Co.    of 

Greece. 

New  York  &  American  (South)  Line. 

Norton  Lilly  &  Co. 

Ocean  Transportation  Co. 

Otrophon  Steamship  Corporation. 

Oriental  Navigation  Co. 

Pierce  Bros. 

Red  Star  Line. 

69 


70 


OCEAN  BATES  AND  TERMINAL  CHARGES. 


New  York— Continued. 
Richards,  C.  B.,  &  Co. 
Raporel  Steamship  Line. 
South  American  Steamship  Corpora- 
tion. 
Spanish  Royal  Mail  Line. 
States  Marine  Commercial  Co. 
Scandanavian- American  Line. 
Taya  Jose  &  Sons. 
Trinidad  Line. 
Universal  Transportation  Co. 
United  States  &  Australasian  Co. 
United  Fruit  Co. 
Ward  Line. 

Wardrop  West  African  Line. 
Wessel  Duval  &  Co. 
White  Star  Line. 
Wilson  Line  (Sanderson  &  Co.). 
Winchester,  J.  IT.,  &  Co. 
Ybarra  Line. 


Savannah:  Straohan  Shipping  Co. 
Mobile:  S.  A.  Le  Blanc. 
New  Orleans: 

Cuyamel  Fruit  Co. 

Le  Blanc,  Alfred. 

Richard  Meyer  &  Co. 

George  Plant. 

Ross  &  Heyn. 

Wolvin  Line. 

Vila  &  Co. 

South  Atlantic  Steamship  line. 

Norton  Lilly  &  Co. 
Galveston: 

United  Steamship  Co. 

Fowler  &  McVitie. 

Wm.  Parr  &  Co. 

Thomas  Rice. 

S.  Sgitcovich  &  Co. 
Philadelphia:  Gailey  Davis  &  Co. 
Baltimore:  Garland  Steamship  Co. 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


71 


Each  request  consisted  of  the  following: 

1.  A  letter  indicating  the  nature  of  the  request. 

2.  A  list  of  instructions, 

3.  A  list  of  commodities  upon  which  export  rates  were. desired. 

4.  A  number  of  blank  schedules  upon  which  rates  were  to  be  reported. 

A  copy  of  the  schedule  used  in  reporting  rates  is  attached  to  this  report,  marked 
"Exhibit  A."  The  use  of  this  schedule  made  all  reports  uniform  in  character  and 
greatly  facilitated  the  compilation  of  the  card  index.  The  "instructions"  for  the 
guidance  of  those  requested  to  report  rates  are  reproduced  in  Exhibit  B. 


The  list  of  commodities  upon  which 

I.  General  cargo. 
II.  Special  commodities: 

1.  Agricultural  machinery. 

2.  Alcohol. 

3.  Automobiles. 

4.  Barb  wire. 

5.  Binder  twine. 

6.  Brass. 

7.  Coffee. 

8.  Coffee  bags. 

9.  Copper. 

10.  Com  sirup. 

11.  Cotton. 

12.  Dried  fruits. 

13.  Flour. 

14.  Flour  bags. 

15.  Grain. 

16.  Iron  pipe. 

17.  Leaf  tobacco. 

18.  Lubricating  oil. 


rates  were  requested  was  as  follows: 

II.  Special  commodities — Continued. 

19.  Machinery. 

20.  Oil,  refined. 

21.  Provisions. 

22.  Rails. 

23.  Rosin. 

24.  Sewing  machines. 

25.  Spelter. 

26.  Steel  plates.  . 

27.  Tin  plate. 

28.  Wax. 

29.  Zinc. 
III.  Complete  or  bulk  cargo: 

1.  Cotton. 

2.  Coal. 

3.  Flour. 

4.  Grain  (oata,  wheat,  etc.), 

5.  Lumber. 

6.  Oil,  barrel. 

7.  Oil,  case. 


As  the  roporls  were  submitted  by  the  steamship  companies,  the  rates  were  trans- 
scribed  upon  cards.  A  sample  card,  marked  "Exhibit  C,"  accompanies  this  report. 
The  blank  spaces,  for  information  other  than  the  statement  of  rates,  were  included  m 
the  card  at  your  request. 

The  card  index  which  has  been  compiled  gives  fairly  complete  information  con- 
cerning export  freight  rates  from  the  Atlantic  and  Gulf  ports  of  the  United  States 
during  the  year  ending  June  30, 1918.  A  large  number  of  import  rates  are  also  included 
in  the  file,  separately  indexed. 

The  card  index  has  been  made  in  duplicate,  the  cards  arranged  according  to  the 
following  divisions  and  subdivisions: 

I.  Ports  of  United  States,  alphabetically  arranged. 
A.  Continents,  alphabetically  arranged. 

1.  Foreign  ports,  alphabetically  arranged. 

(a)  Commodities,  alphabetically  arranged. 

In  order  to  give  some  indication  of  the  general  level  of  freight  rates  during  the  year 
covered  by  the  investigation,  I  have  transcribed  on  summary  sheets  the  high,  low, 
and  the  monthly  average  rates  on  certain  commodities  between  selected  ports  of  the 
United  States  and  selected  ports  in  foreign  countries.  A  sample  of  the  summary 
sheets  is  appended  as  Exhibit  D. 

The  summary  sheets  do  not  in  any  way  represent  all  the  rates  contained  in  the  card 
index.  They  have  been  prepared  to  indicate  in  a  brief  manner  the  character  of  the 
work  done  dvu*ing  the  investigation. 

A  study  of  the  rates  submitted  by  the  various  companies  shows  that  there  was  a 
wide  fluctuation  of  commercial  freight  rates  during  the  year  ending  June  30,  with  the 
trend  of  changes  steadily  upward. 

I  desire  to  express  my  sense  of  obligation  to  Mr.  Harry  Fowler,  of  Caldwell  &  Co., 
for  his  constant  counsel  and  assistance  during  all  phases  of  the  investigation.  I  am 
also  under  obligation  to  Mr.  Aaron  Houtman,  of  the  Shipping  Control  Committee; 
Mr.  .Walter  Moore,  of  Luuham  &  Moore;  and  Mr.  Armstrong,  of  Loeser,  Robinson  & 
Armstrong,  for  advice  and  counsel  in  devising  the  schedule  upon  which  rates  were 
repotted,  and  in  compiling  the  lists  of  commodities  and  of  steamship  companies. 

Mrs.  Elsa  Potter,  the  ofiice  manager,  is  entitled  to  a  special  word  of  acknowledgment 
for  her  capable  and  earnest  work  during  the  entire  course  of  the  investigation.  During 
my  enforced  absences  from  the  office,  Mrs.  Potter  has  carried  on  the  work  in  a  com- 
pletely satisfactory  manner.  Miss  Wadley,  the  other  office  assistant,  has  done  her 
work  faithfully  and  efficiently. 

May  I  acknowledge  my  indebtedness  to  you  for  the  help  you  have  given  in  solving 
tie  many  problems  which  arose  during  this  work? 

Very  .Tuly,  yours,  t.  W.  Van  Metbe. 


'!" 


' 


72 


OCEAN   RATES  AND  TERMINAL   CHARGES. 


^     S 


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OCEAN   RATES   AND  TERMINAL  CHARGES. 


73 


iccioai-^-'.-<i->)-,MOP' 


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OCEAN  BATES  AND  TERMINAL  CHARGES. 


s 


i 


Per 
(cu.  ft., 
100  lbs. 

ton. 

i  :  I  !  i  :  :  :    ' 

1 

Monthly 
average. 

•  •  '  i  ':  ■  i  : 

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:  :  :  :  :  1  :  :    i 

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etc. 

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Monthly 
average. 

1                 ••••!••• 

1     :::::::: 

'••••'•• 

1     :::::::: 

■a         i    :::::::: 

«         ,    : i  i  i  i  ii  : 

Per 
(cu.  ft., 
100  lbs. 

ton, 

etc. 

::::::::    ; 

Monthly 
average. 

•••••••• 

•    S    I    !    2    I    !    ! 

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s       »       s       s 

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k 

OCEAN   RATES  AND  TERMINAL   CHARGES.  75 

Exhibit  B. 

•  instructions. 

In  reporting  rates  upon  the  accompanying  form,  please  be  guided  by  the  following 
rules: 

1.  Give  rates  between  specific  ports,  filling  in  the  names  of  ports  from  which  traffic 
moves  in  the  blank  spaces  provided  at  the  top  of  the  schedule,  and>  names  of  porta 
to  which  traffic  moves  in  the  blank  spaces  on  the  left-hand  margin.  Give  rates 
between  all  ports  of  the  United  States  and  foreign  ports  which  your  company  serves. 

2.  Do  not  give  rates  for  more  than  one  commodity,  except  for  general  cargo,  on  a 
single  sheet.  Give  the  name  of  the  commodity  in  the  space  provided  in  the  upper 
left-hand  corner  of  the  schedule. 

3.  Give  import  rates,  where  available,  upon  the  leading  articles  of  traffic  imported 
from  each  country  from  which  you  have  transportation  service. 

4.  In  the  column  headed  "per  (cu.  ft.  100  lbs.  ton  W/M,  etc.),"  give  the  unit  upon 
which  rate  is  quoted.  The  amount  of  the  rate  will  then  indicate  so  much  per  100 
pounds  or  per  ton  (gross  or  net),  or  per  cubic  foot,  or  per  ton  W/M,  etc. 

5.  To  obtain  the  monthly  average  rate  on  any  commodity,  compute  first  the  average 
for  each  month  of  the  quarter  and  give  the  average  of  these  averages. 

6.  Give  sailing  vessel  rates,  when  available,  on  separate  sheets,  marking  such  sheets 
with  the  words  "  Sailing  vessel  rates." 

7.  Give  complete  cargo  rates  (export)  if  any  have  been  employed  for  commodities 
listed  under  "  III:  Complete  or  bulk  cargo." 

8.  Give  export  rates  on  the  articles  enumerated  in  the  "I.ist  of  commodities." 


Exhibit  C. 


To: 


From: 


Year. 

Quarter. 

Power. 

High. 

Low. 

Monthly 
average. 

Unit. 

Cost  of  service. 

Rate 
recommended. 

1 

Amount. 

Unit. 

Amount. 

Unit. 

July,  August, 
September. 

Steam... 

1 
i 

Sail 

1917 

October, 
November, 
December. 

Steam. . 

■    1 

..... 

Remarks. 

Sail 

January, 

February, 

March. 

Steam 

Sail           

1918 

1 

April,  May, 
June. 

Steam... 

Sail... 

Rates  quoted  by: 


76 


OCEAN   KATES  AND  TERMINAL  CHARGES. 


Q 

» 


H 


OCEAN   RATES  AND  TERMINAL   CHARGES. 


77 


OS 

■§1&|s-|lgj 

^       1 


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45 

• 

3 
O 

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1 

■ 

i 

6- 

t 

S 

* 

n 

^    SSR8    88S^    S  : 

:8 

38.00 
40.00 

8 

3.00 

18.00 
27.20 
20.40 
24.00 

60.00 
59.30 
62.40 
58.10 

30.00 

:8 

8 

• 

•8    8888    8S5S    8  : 

:8 

^  : 
>>  . 

w  : 
8  : 

"oS 

Athens 

Dakar 

Monrovia 

Lagos 

South  and  East  Africa: 

Capetown 

Port  Natal 

Delagoa  Bay 

Algoa  Bay 

Asia  (East  Coast): 

Vladivostok 

Hongkong 

Asia  (Indies): 

B  ombay 

Calcutta 

Batavia 

J'recmantle 

Sydney 

Mp.lhnnmn                               

c 

Appendix  V. 

REPORT  UPON  THE  INVESTIGATION  OF  FREIGHT  RATES  AT  PACIFIC 

PORTS. 

By  Althea  M.  Behrenr. 

i  Memorandum  to  Dr.  Emory  R.  Johnson.] 

The  investigation  of  freight  rates  charged  on  export  and  import  commodities  of  the 
Pacific  coast  during  the  year  ending  June  30,  1918,  was  begun  in  June,  1918.  The 
freight  rates  were  those  of  companies  carrying  traffic  between  the  Pacific  ports  and 
ports  of  Mexico,  Central  America,  South  America,  the  Indies.  Australia,  and  New 

Zealand. 

The  first  step  in  the  investigation  was  the  securing  of  freight  rates  from  the  steam- 
ship companies  for  the  year  ending  June  30,  1918.  This  was  in  charge  of  Mr.  W.  I). 
Benson,  of  Seattle,  Wash.,  a  task  for  which  he  was  admirably  fitted  because  of  his 
position  as  secretary  of  the  Pacific  Coast-Oriental  Tariff  Bureau,  his  own  thorough 
knowledge  of  rates,  and  his  experience  in  the  shipping  business. 

Export  rates  proved  easier  to  secure  than  import  rates,  since  Mr.  Benson  could  make 
personal  application  for  them  at  the  home  offices  of  the  steamship  companies.  The 
export  rates  of  the  tariff  biu-eau  were  secured;  also  the  rates  of  individual  companies. 
The  following  are  the  companies  included  in  the  tariff  bureau: 


The  Bank  Line  (Ltd.). 

Canadian  Pacific  Ocean  Services  (Ltd.). 

China    Mutual    Steam    Navigation    Co. 

(Ltd.). 
Great  Northern  Steamship  Co. 
Hambmrg- American  Line. 
Java-Pacific  Line  of  the  Java-China-Japan 

Line. 


Ocean  Steamship  Co.  (Ltd.) 
Osaka  Shosen  Kaisha. 
H.  F.  Ostrander. 

Portland  and  Asiatic  Steamship  Co. 
The  Royal  Mail  Steam  Packet  Co. 
Frank  Waterhouse  &  Co. 
Trans-Oceanic  Co. 
Dodwell  &  Co. 


Nippon  Yusen  Kaisha. 
The  companies  not  members  of  the  tariff  bureau  who  reported  rates  are: 

Caldwell  &  Co. 
Dodwell  &  Co.  (Ltd.). 
Robert  Dollar  Co. 
East  Asiatic  Co. 
A.  M.  Gillespie  (Inc.). 
W.  R.  Grace  &  Co. 
James  Griffiths  &  Sons. 


Oceanic  Steamship  Co. 
Pacific  Steamship  Co. 
Pacific  Mail. 

South  American  Pacific  Line. 
Struthers  &  Dixon  (Inc.). 
Toyo  Kisen  Kaisha. 
Trans-Oceanic  Co. 


Mitsui  &  Co.  (Inc.). 

The  import  rates  were  obtained  through  correspondence  with  foreign  offices,  and 
the  reports  are  not  so  complete  as  those  for  exports.  The  steamship  companies  from 
which  import  rates  were  received  are  the  following: 


Caldwell  &  Co. 
Robert  Dollar  Co. 
East  Asiatic  Co.  (Ltd.). 
A.  M.  Gillespie  (Inc.). 
James  Griffiths  &  Sons. 
Java  Pacific  Line. 
Mitsui  Co. 
Osaka  Shosen  Kaisha. 


H.  F.  Ostrander. 
Pacific  Mail  Steamship  Line. 
Pacific  Steamship  Co. 
Struthers-Dixon  Co. 
Toyo  Kisen  Kaisha. 
Trans-Oceanic  Co. 
Frank  Waterhouse  &  Co. 
Oriental  Tariff  Bureau. 


The  second  step  was  the  transcribing  of  the  rates  which  had  been  sent  in  by  tlie 
steamship  companies  from  the  record  sheets  to  cards.    (See  Exhibit  C,  attached  to 

78 


T 


OCEAN   RATES  AND  TERMINAL   CHARGES. 


79 


Appendix  IV.)  Cards  were  made  from  all  records  with  the  exception  of  the  records 
of  the  Mitsui  Co.,  whose  rates  were  received  too  late  for  compilation.  The  cards  were 
then  filed,  one  file  for  exports  and  one  for  imports,  with  commodities  alphabetically 
arranged  under  foreign  ports.    The  arrangement  in  the  files  is  as  follows: 


I.  Canadian  ports: 
Vancouver. 
Victoria. 
II.  United  States  ports: 
Portland. 
San  Francisco. 
Seattle. 
Tacoma. 
III.  (A)  Asia  and  the  Indies: 

Calcutta,  India. 

Colombo,  Ceylon. 

Hongkong,  China. 

Kobe,  Japan. 

Manila,  P.  I. 

Moji,  Japan. 

Nagasaki,  Japan. 

Samarang,  Java. 

Shanghai,  China. 

Singapore,     Straits    Settle- 
ments. 

Vladivostok,  Siberia. 

Yokohama,  Japan. 
(B)  Australasia: 

Australia,  Sydney. 

New  Zealand,  Wellington 


III.  '(C)  Central  America  and  Mexico: 
Acajutla,  Salvador. 
Acapulco,  Mexico. 
Amapala,  Honduras. 
Balboa,  Panama. 
Champerico,  Guatemala. 
Corinto,  Nicaragua. 
La  Libertad,  Salvador. 
La  Union,  Mexico. 
Manzanillo,  Mexico. 
Mazatlan,  Mexico. 
Punta  Arenas,  Costa  Rico. 
Salina  Cruz,  Mexico. 
San  Bias,  Mexico. 
San  Jose,  Guatemala. 
San  Juan  del  Sur,  Nicaragua. 
*(D)  South  America: 

Antofogasta,  Chile. 
Arica,  Chile. 
Bahia,  Colombia. 
Buenaventura,  Colombia. 
Callao,  Peru. 
Guyaquil,  Ecuador. 
Mollendo,  Peru. 
Valparaiso,  Chile. 


The  final  step  in  the  work  was  a  summary  of  the  export  and  the  import  rates.  This 
was  made  on  large  sheets,  one  sheet  for  each  commodity.  (A  sample  sheet,  marked 
"Exhibit  A,"  is  attached  to  this  report.)  Only  exports  from  and  imports  to  San 
Francisco,  Seattle,  Tacoma,  and  Vancouver  were.8ummarized,  and  only  a  limited  and 
representative  number  of  foreign  ports  was  taken  into  consideration.  A  distinction 
was  made  between  subsidized  and  nonsubsidized  steamer  rates,  so  that  a  commodity 
for  which  both  rates  were  given  had  a  sheet  for  each  set  of  rates.  The  only  subsidized 
steamers  were  those  aided  by  the  Japanese  Government.  The  only  sail  rates  are  to 
Manila,  and  are  few  in  number.  It  was  not  deemed  necessary  to  summarize  them  on 
separate  sheets,  but  the  sail  rates  are  included  with  appropriate  designation  in  the 
summary  of  rates  for  steamers. 

FACTS   ASCERTAINED. 

I.  The  rates  show  a  steady  rise  throughout  the  year  with  a  more  marked  advance  for 
the  last  three  months  than  for  any  other  time,  especially  marked  in  conference  rates 
where  the  rates  for  the  first  three-quarters  are  fairly  stationary,  but  sudden  advance 
comes  for  the  last  quarter. 

II.  A  comparison  of  subsidized  and  nonsubsidized  rates  shows  that  the  great  majority 
of  subsidized  steamers  were  enabled  by  this  help  from  the  Government  to  carry  their 
cargoes  at  lower  rates  than  those  not  so  aided. 

III.  War  surcharges  of  25  per  cent  were  often  added  in  the  case  of  Mexican  and 
Central  American  exports  and  imports,  this  surcharge  being  50  per  cent  at  Balboa. 

IV.  Sail  rates  are  to  be  had  only  in  the  case  of  exports  to  Manila. 


»  Export  rates  were  received  to  Central  American,  Mexican,  and  South  American  ports  only  in  the  case 
of  trade  from  San  Francisco  and  Seattle,  the  trade  from  Portland,  Tacoma,  Vancouver,  and  Victoria  being 
with  Asia  and  the  Indies.    This  is  true  also  of  imi>ort  rates. 


80 


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APPENDIX  VI. 

.   NOTES  UPON  MAKING  OCEAN  RATES  BASED  ON  COSTS. 

Having  ascertained  the  normal  capital  costs  and  current  expenses  for  a  vessel  or 
group  of  vessels  of  given  size  and  speed  operated  in  a  designated  trade,  the  expenses 
for  a  voyage  or  for  a  year,  divided  by  the  number  of  units  of  service,  actual  or  possible, 
will  give  the  amount  or  rate  that  must  be  obtained  from  each  service  to  cover  costs 
and  expenses.  If  profits  are  to  be  made  or  allowed,  the  rates  will  be  put  at  such  a 
level  above  the  cost  basis  as  circumstances  may  warrant  or  informed  judgment  may 
dictate. 

The  ascertainment  of  the  costs  of  individual  transportation  services  increases  in 
difficulty,  at  more  than  a  proportionate  ratio,  with  the  increase  in  the  number  and 
the  variety  of  services  simultaneously  performed  by  a  carrier,  whether  by  railroad  or 
ocean  vessel.  The  capital  costs  and  many  of  the  operating  expenses  being  incurred 
for  all  the  services  in  the  aggregate  have  only  an  indirect  relation  to  the  divers  and 
diverse  services  for  which  separate  rates  must  be  made,  and  it  is  difficult  so  to  allocate, 
even  approximately,  the  common  costs  and  expenses  as  to  arrive  at  figures  expressive 
of  the  costs  of  the  several  services.  The  allocation  of  expenses  among  the  different 
articles  transported  must  be  to  some  extent  arbitrary  and  inaccurate,  and  it  is  thus 
impossible  to  work  out  schedules  of  commodity  or  even  of  class  rates  that  corre8pon4 
exactly  to  costs  of  service. 

In  this  connection,  it  may  be  well  to  refer  to  the  fact  accepted  generally  by  those 
who  have  given  special  consideration  to  rate  making,  that  the  chaiges  for  transporta- 
tion services  ought  seldom  if  ever  to  be  strictly  in  accordance  with  the  costs  of  service. 
There  are  other  factors  than  costs  that  must  be  taken  into  consideration  in  scientific 
rate  making.  If  articles  having  widely  different  value  cost  practically  the  same  to 
transport,  as  is  often  the  case,  rates  based  strictly  upon  costs  of  service  might  be  pro- 
hibitive for  one  article  and  unjustifiably  low  for  the  other.  Differences  in  value  of 
commodities  must  influence  rail  and  ocean  freight  rates.  The  same  is  true  of  dif- 
ferences in  risks  of  transportation,  perishability  of  commodities,  and  other  physical 
or  intrinsic  characteristics  affecting  the  classification,  packing,  handling,  and  other 
incidents  of  the  transportation  of  freight. 

In  deciding  upon  the  rates  of  compensation  to  be  made  for  vessels  whose  use  is 
requisitioned  by  the  Government,  a  direct  and  comparatively  simple  use  can  be 
made  of  ascertained  costs  in  fixing  rates.  The  requisition  rates  are  in  part  a  com- 
pensation for  property  of  whose  use  the  owners  are  temporarily  deprived,  and  in  part 
a  payment  to  cover  expenses  which  the  owners  incur  while  their  property  is  under 
the  control  of  the  Government. 

When  a  vessel  is  requisitioned  ''bare  boat,"  the  owner  has  no  expenses  to  meet 
after  he  has  delivered  his  vessel  to  the  United  States  "tight,  staunch,  strong,  and  well 
and  sufficiently  tackled,  appareled,  furnished,  outfitted  and  equipped,  and  in  every 
way  seaworthy  and  in  good  running  order  and  condition."  If  the  vessel  thus  taken 
by  the  Shipping  Board  is  assigned  to  the  owner  to  operate  for  the  board,  he  has  no 
operating  expenses ;  they  are  all  borne  by  the  Government.  The  bare  boat  requisition 
rate  is  a  compensation  for  the  use  of  property.  The  Government  temporarily  carries 
the  owner's  capital  costs,  and  has  generously  made  him  a  payment  which  included 
some  of  the  profits  that  the  owner  might  have  made  had  he  been  allowed  the  use  of 
his  property.  The  bare  boat  requisition  rate  is  determined  by  fixing  a  value  for  the 
118231—19 6  gi 


82 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


83 


vessel,  or  class  of  vessels,  taken  and  by  calculating  what  payment  per  dead -weight 
ton  per  month  will  give  the  owner  an  income  equal  to,  or  somewhat  exceeding,  the 
costs  of  carrying  the  capital  he  has  invested  in  the  property  taken  temporarily  by 
the  Government. 

When  the  owners  of  requisitioned  vessels  are  compensated  upon  the  basis  of  a 
"time  form"  charter,  the  owner  not  only  provides  the  vessel  but  also  pays  "for  all 
provisions,  wages,  bonuses,  and  consular  shipping  and  discharging  fees  of  the  master, 
officers,  and  crew,  and  *  *  *  for  all  cabin,  deck,  engine  room,  and  other  necessary 
sjorcs."  He  must  also  maintain  the  ship  and  her  equipment  during  the  requisition 
period.  In  addition  to  capital  costs,  the  owner  has  certain  operating  and  maintenance 
expenses  when  his  vessel  is  requisitioned  by  the  Government  and  turned  over  to  him 
to  operate  under  a  time  form  charter.  The  rate  of  pay  for  a  vessel  requisitioned  time 
form  is,  thus,  the  amount  payable  under  the  bare  form  increased  by  the  amount  of 
the  owner's  current  expenses.  Having  ascertained  the  owner's  capital  costs  and  the 
operating  and  maintenance  expenses  that  he  has  to  bear,  it  is  easy  to  calculate  the 
equivalent  monthly  payment  or  requisition  rate  per  dead-weight  ton  per  month. 
Requisition  rates,  both  bare  boat  and  time  form,  can  readily  be  worked  out  upon  the 

cost  basis. 

WTien  the  problem  of  rate  mak^'ng  is  that  of  fixing  charges  for  the  transportation  of 
a  full  vessel  cargo  composed  of  a  single  commodity  to  be  transported  to  any  given 
destination  in  a  ship  whose  size  and  speed  are  known,  and  when  the  normal  capital 
costs  and  operating  expenses  of  a  vessel  of  the  class  to  which  the  ship  in  question 
belongs  are  known,  the  task  is  comparatively  easy.  If  the  cost  data  have  previously 
been  worked  out  for  vessels  of  the  class  to  which  the  ship  being  considered  belongs, 
it  is  necessary  only  to  calculate  the  expenses  for  the  time  that  will  be  consumed  in 
making  the  voyage,  including  time  spent  at  terminals,  and  to  divide  the  total  capital 
costs  and  current  expenses  by  the  number  of  tons,  or  number  of  units,  of  cargo,  and  the 
quotient  will  be  the  freight  rate  corresponding  to  costs  of  the  service.  That  rate, 
increased  by  whatever  percentage  it  is  deemed  proper  to  add  to  make  the  services 
profitable  to  those  who  perform  it,  will  be  the  rate  for  the  Government  authority  to 

establish.. 

In  the  trade  between  the  United  States  and  all  sections  of  the  world,  there  are  both 
commodity  freight  rates  and  rates  applicable  to  "general  cargo."  The  unit  upon 
which  the  charges  for  general  cargo  is  based  is  in  most  cases  a  ton  either  of  40  cubic 
feet  or  2,240  pounds,  and  ordinarily  the  carrier  may  decide  whether  the  charge  shall 
be  for  the  measurement  or  for  the  weight  ton;  in  other  words,  the  rate  is  quoted  as  so 
much  per  ton,  weight  or  measurement,  ship's  option.  The  general  cargo  rate  is  in 
reality  a  charge  based  upon  space.  Experience  shows  that  a  vessel  of  a  certain  dead- 
weight tonnage  can  be  loaded  with  a  known  number  of  tons  of  general  cargo;  and 
general  cargo  rates  are  such  charges  as  multiplied  by  the  number  of  units  of  general 
cargo  freight  (that  may  be  transported)  will  produce  the  income  necessary  to  cover 
the  costs  of  service  for  the  vessels  for  which  charges  are  made,  or  will  equal  the  costs 
of  service  plus  such  profits  as  the  owner  may  desire  to  make  or  may  be  allowed  by 
Government  authorities  to  obtain. 

Experience  in  the  operation  of  vessels  gives  the  data  upon  which  the  capital  costs 
and  current  expenses  for  voyages  in  each  "ocean  trade,"  such  as  the  Brazilian, 
Argentine,  Australian  trades,  etc.,  may  be  calculated  for  different  classes  of  vessels. 
The  expenses  being  known,  and  also  the  number  of  tons  of  general  cargo  that  can 
normally  be  carried,  it  is  possible  readily  to  arrive  at  a  proper  general  cargo  rate  for 
each  of  the  several  ocean  trades.  The  amount  of  cost  data  required  is  large,  and  it 
is  only  by  detailed  studies  of  the  results  of  actual  experience  that  the  requisite  informa- 
tion can  be  obtained;  but  when  once  it  has  been  secured  the  calculation  of  general 
cargo  rates  is  not  especially  difl&cult. 


"Berth  rates"  have  many  points  in  common  with  general  cargo  rates.  In  ordinary 
times,  when  rates  are  not  fixed  by  the  Government,  the  owner  or  charterer  of  the  vessel 
placed  upon  the  berth  sells  space  at  berth  rates;  in  other  words,  he  accepts  cargo  at 
such  rates  per  ton,  weight  or  measurement,  and  in  such  quantities  as  may  be  agreed 
upon  by  carrier  and  shipper. 

The  berth  rates  charged  by  the  carrier  and  allowed  by  Government  authority  must 
be  sufficient  to  cover  the  owner's  capital  costs  and  current  expenses,  or  the  charterer's 
necessary  payments  to  the  owner  for  the  hire  of  the  vessel  and  the  operating  expenses 
which  the  charterer  must  bear  under  the  terms  of  the  charter  party.  For  placing  a 
vessel  upon  the  berth  and  taking  the  chance  of  securing  a  full  and  economical  lading 
of  cargo  within  a  reasonable  time,  the  owner  or  charterer  is  entitled  to  compensation 
or  profits  proportionate  to  the  risk  incurred  and  to  the  business  ability  necessary  to 
the  successful  management  of  the  enterprise. 

When  ocean  rates  are  determined  by  competition,  and  fluctuate  generally  and  locally 
with  every  change  in  the  relation  of  tonnage  supply  and  traffic  demand,  berth  rates 
often  apply  only  to  such  parts  of  a  vessel  as  have  not  been  taken  up  by  regular  cargo» 
The  agents  or  masters  of  the  ship  offer  to  dispose  of  the  unoccupied  space  on  a  vessel 
nearly  laden  at  attractive  berth  rates.  It  often  happens  also  that  a  vessel,  particularly 
a  tramp,  may  not  be  able  to  secure  promptly  a  lading  of  bulk  cargo,  in  which  case 
the  owners  or  charterers  of  the  vessel  may  place  the  ship  "on  the  berth  "  and  announce 
that  up  to  a  certain  date  space  will  be  sold  or  berth  cargo  accepted  at  rates  to  be 
agreed  upon  with  the  shipper.  Under  ordinary  competitive  conditions,  berth  rates 
usually  are  lower  than  corresponding  commodity  or  general  cargo  rates. 

When  a  commodity  is  reguiarly  shipped  in  full  cargo  lots,  or  in  bulk  in  large  quan- 
tities, the  freight  rate  will  naturally  be  lower  than  for  "package  freight"  or  for  an 
article  regularly  shipped  in  relatively  small  amounts.  If  the  commodity  be  coal, 
ore,  or  any  other  article  of  low  value  per  weight  or  bulk,  the  rate  must  be  correspond- 
ingly low.  The  calculation  of  rates  for  commodities  regularly  handled,  as  bulk 
cargo,  is  in  fact  the  problem  of  determining  "charter  rates,"  as  explained  above.  In 
the  case  of  commodities  that  are  shipped  in  relatively  small  quantities,  and  which 
are  combined  with  a  score  and  possibly  many  score  of  other  articles  in  the  lading  of 
an  ocean  vessel,  the  making  of  freight  rates  is  a  difficult  task.  The  costs  of  service 
assignable  to  the  several  dissimilar  articles  can  be  only  approximately  determined, 
and  resort  to  estimates  and  to  arbitrary  rules  for  the  allocation  of  costs  is  necessary 
in  working  out  a  schedule  of  freight  rates  based  on  costs  of  service.  But  the  fact 
that  perfection  can  not  be  achieved  is  never  a  reason  for  not  seeking  to  secure  the  best 
obtainable  results;  and  this  rule  of  conduct  holds  true  of  efforts  to  determine  freight 
rates  corresponding  to  costs  of  ser\dce. 

Having  ascertained  the  aggregate  income  which  a  given  vessel  carrying  mixed 
cargo  must  secure  to  meet  the  costs  and  expenses  of  a  voyage,  or  of  the  period  of  time 
required  to  perform  the  services  for  which  charges  are  to  be  levied,  the  rate  maker 
must  allocate  the  total  amount  among  the  several  commodities  by  considering  the  space 
occupied  by  different  articles,  their  relative  weights,  their  liability  to  damage,  and, 
in  short,  the  various  factors  affecting  relative  costs  of  ser\dce.  The  judgment  and  expert 
knowledge  of  the  rate  maker,  rather  than  accounting  or  other  rules,  must  often  deter- 
mine the  decision  reacUed.  Moreover,  as  is  well  known,  the  rates  finally  decided 
upon  must  necessarily  reflect  differences  in  the  values  of  the  commodities,  as  well 
as  dissimilarities  in  costs  of  service,  if  the  rates  are  to  be  equitable  to  shippers  and  are 
to  be  in  harmony  \nth  industrial  and  trade  requirements.  The  cost  of  service,  as 
a  basis  of  freight  rates,  has  its  limitations. 

The  rates  for  services  by  sailing  vessels  are  ordinarily  appreciably  less  than  the 
rates  for  the  services  of  steamships.  The  amount  of  the  differential  between  sailing 
and  steam  rates  is  determined,  when  competition  is  prevalent,   by  the  relative 


84 


OCEAN  RATES  AND  TERMINAL  CHARGES. 


advantages  of  the  services  by  the  two  classes  of  vessels  as  employed  in  different  trades. 
For  some  trades  and  routes  sailing  vessels  are  better  adapted  than  others,  and  their 
rates  will  correspond  to  service  eflficiency.  When  all  vessels  are  scarce,  the  normal 
difference  between  the  rates  of  sailing  vessels  and  steamers  may  be  largely  disregarded. 
In  general,  rates  made  to  meet  war  conditions  have  been  especially  attractive  to  sail- 
ing vessels  in  order  to  induce  them  to  enter  trades  from  which  the  withdrawal  of 
steamers  was  especially  to  be  desired.  In  establishing  and  controlling  sailing  vessel 
rates  it  seems  advisable  to  agree  upon  the  proper  relationship  between  the  rates  of 
sailing  vessels  and  steamers  in  each  of  the  leading  trades,  and  to  establish  rates  by 
sailing  vessels  having  a  relation  to  the  rates  by  steamers  that  correspond  with  differ- 
entials found  to  be  reasonable. 


o 


§ 


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